DOW INDUSTRIALS EXCEED 2008 PEAK -- DOW TRANSPORTS RIDE THE RAILS HIGHER -- KANSAS CITY SOUTHERN REACHES NEW RECORD -- S&P 500 BOUNCES OFF NEW SUPPORT -- BOND PRICES TURN DOWN AS STOCKS RALLY
DOW INDUSTRIALS EXCEED 2008 HIGH... With stocks ralling nicely today, the Dow Industrials are the first to reach a new 52-week high. Chart 1 shows the Dow trading above its spring highs to resume its major uptrend. The weekly bars in Chart 2 also show the Dow moving above its 2008 peak at 13136 (see line). That sets up the likelihood for an eventual test of its 2007 high. The Dow Transports are also leading the market higher today, thanks to strong rallies in rail stocks.
(click to view a live version of this chart)
Chart 1
(click to view a live version of this chart)
Chart 2
DOW TRANSPORTS ALSO HAVE STRONG DAY... Followers of Dow Theory always like to see the Dow industrials and transports rallying together. Today's 1.5% gain in the transports made them one of the day's strongest groups. But they have yet to breakout to the upside which is necessary to confirm today's breakout in the industrials. Chart 3 shows the transports consolidating since February. Technical odds favor an eventual upside breakout. The weekly bars in Chart 4 show the transports still trading below their 2011 high and underperforming the industrials over the last year (see falling RS line below chart). The transports, however, appear closer to an all-time high than the industrials. The bottom line is it's usually a good sign for the market when both are rising together. Most of today's transportation strength came from the rails.
(click to view a live version of this chart)
Chart 3
(click to view a live version of this chart)
Chart 4
KANSAS CITY SOUTHERN LEADS RAILS HIGHER... Four of the top transportation gainers today were rails. Chart 5 shows the rail leader which is Kansas City Southern trading at a new all-time high. Other rail stocks haven't yet done so, but are getting close. Chart 6 shows the Dow Jones US Railroad Index challenging its record highs formed during 2011 and this first quarter. An upside breakout appears imminent.
(click to view a live version of this chart)
Chart 5
(click to view a live version of this chart)
Chart 6
S&P RESISTANCE TURNS INTO SUPPORT... The hourly bars for the S&P 500 show that index recently rising above chart resistance at 1392 which was the peak formed in mid-April. That resistance line has now become support. That's why the flat line turned from red to green. The SPX bounced off that line yesterday. The next stop for the SPX will most likely be a test of its April high at 1422. Energy and financial stocks also led today's market rally.
(click to view a live version of this chart)
Chart 7
BONDS TURN DOWN... When stocks rally, bonds usually correct. And that's what they did today. Chart 8 shows the 7-10 Year T-Bond iShares backing off from resistance along its first quarter highs. Bond yields jumped as prices fell.
