MARKETS BUILD A SMALL BASE -- COAL STARTS TO LEAD AS $NATGAS RISES -- ARCH COAL STARTS TO HEAD HIGHER -- BEBE STORES BUCKS THE CYCLICAL SECTOR TREND -- EDWARDS LIFE SCIENCES CREATES A GAP BREAKOUT

MARKETS BUILD A SMALL BASE... As I prepared my notes for today's message at 3 PM, the Nasdaq had fallen back into the red and the Dow had lost 120 points from the high. By the time the market closed, the $INDU closed near the highs. That is a rapid change as shown in Chart 1! It would appear that the market has been trying to put in a base for a few days here. The upside target would be around 16325 for a first measure as shown on Chart 2. This is also the centre of the volume by price information. You can see the multiple tests of support on this one month intraday view.

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Chart 1

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Chart 2

COAL STARTS TO LEAD AS $NATGAS RISES... The Coal ETF has started to move above its 40 WMA and it has broken the trend line. Chart 3 is looking very bullish for the coal tracking ETF. What led me to look at Coal? Coal is one of the top industry groups in the energy sector for the previous month. Oil Services overtook it today. I will write about Oil Services tomorrow as I had the coal information all built as the Dow Jones Indexes all got their end of day update before I published. You can find this sector breakdown methodology by looking at the "Sector Summary" on the home page immediately under the market graph on the left.
This will show the best sectors and you can select the time frame of 1 month above in the drop down box showing 'Intraday.' You can click on the top sector - energy - to see what industry groups are leading. It maintains the one month sort if you selected that in the header above. Chart 4 is a link to the energy industry group breakdown.

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Chart 3

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Chart 4

So if the Coal Industry group has been outperforming over the last month, we can keep drilling in to see what the top stocks are. My interpretation of why coal would be moving up is based on the rise in price of $NATGAS as a competitive fuel. Arch Coal� ACI �shown in Chart 5 and Cloud - CLD - shown in Chart 6 have started to move.

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Chart 5

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Chart 6

These three coal stocks, Alpha Natural Resources � ANR, Walter Energy �WLT and Teck Resources -TCK- have not started to move. It is definitely a sector to watch to see if it builds momentum here.

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Chart 7

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Chart 8

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Chart 9

BEBE STORES BUCKS THE CYCLICAL SECTOR TREND... Chart 10 shows bebe in the retail apparel industry that started to move today. BEBE has 250 stores. The chart is very compelling as it recently back tested the support line and has now bounced above. The chart is showing a lot of strength even though the cyclical sector is a down draft. With our broadening of the SCTR ranking, you can see bebe recently moved above the 75 level to be an outperforming stock. Some charts will have a short SCTR line as they were just added to our SCTR groups.

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Chart 10

EDWARDS LIFE SCIENCES CREATES A GAP BREAKOUT... Edward life Sciences led the list of movers today. EW gapped up into resistance as shown on Chart 11. It looks pretty strong here and we would like to see the move push through the top of resistance now. We can see the MACD improving on each low and it has now crossed above zero. The resistance and support level is shown in red and green. This is classic 'crossing the creek' terminology for Wyckoff followers. Notice the SCTR ranking has already broke above the 75 level.

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Chart 11

Arthur Hill also wrote up his notes from the MTA meeting. You can find that as a market message today as well.
Good trading,

Greg Schnell, CMT