RALLY PUSHES STOCK INDEXES INTO TEST OF OVERHEAD RESISTANCE -- RISING OIL AND BASE METALS BOOST ENERGY AND MINERS -- ALCOA AND FREEPORT MCMORAN LEAD MATERIALS HIGHER -- BRAZIL AND RUSSIA HAVE STRONG DAY ON BACK OF COMMODITY RALLY

DOW IS THE FIRST TO CLEAR FEBRUARY HIGH ... A strong Monday stock rally pushed U.S. stock indexes right up against initial overhead barriers at their early February peak and 50-day averages. Chart 1 shows the Dow Industrials being the first to exceed its February high. It is still, however, challenging its 50-day line. Chart 2 shows the S&P 500 just below those two barriers. Chart 3 shows the NYSE Composite Index in the same condition. Another strong day in the price of oil, together with stronger industrial metals, pushed energy and mining stocks higher. Gold fell, however, as it lost some of its safe haven appeal. Foreign markets are rallying as well, especially those tied to commodities. Brazil and Russia had especially strong days because of their role as commodity producers. The fact that economically-sensitive stock groups like cyclicals and industrials helped lead the day's advance is another positive sign. Cyclicals are being led higher by toys and autos, while the industrial sector is being spearheaded by aerospace, heavy construction, and airlines. Airlines are also leading a strong transportation group higher.

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Chart 1

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Chart 2

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Chart 3

ENERGY AND ALCOA RALLY ... Chart 4 shows the Energy SPDR (XLE) clearing its 50-day line for the first time since the start of December. Aluminum and copper stocks are leading materials higher. I showed copper producer Freeport McMoran (FCX) turning up last week on rising copper prices. Chart 5 shows aluminum producer Alcoa (AA) leading materials higher today.

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Chart 4

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Chart 5

BRAZIL AND RUSSIA LEAD EMERGING MARKETS HIGHER... Two of world's biggest gainers are in the emerging market space. Chart 6 shows Brazil iShares (EWZ) surging 6% on the back of today's commodity rally. Chart 7 show the Market Vectors Russia ETF (RSX) climbing 3%. Both have cleared their 50-day lines. A rally in Chinese stocks also helped boost commodity prices and emerging markets. Chart 8 shows Emerging Markets iShares (EEM) closing above its 50-day average and reaching a two-month high. That also helped to boost optimism on global stocks.

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Chart 6

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Chart 7

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Chart 8

WHAT KIND OF A BOTTOM?... It's looks like the market has put in some kind of a bottom. That will be especially true if 50-day moving averages are exceeded. But what kind of a bottom? So far, all we can say with some confidence is that stocks have put in a short-term bottom. My recent messages, however, have shown that several U.S. sectors and indices, and well as the FTSE All World index, have reached important support levels where a more important bottom could start to form. Those stock indexes are also in very oversold conditions. New signs of strength in commodities, combined with stronger emerging markets, would also take a lot of pressure off world markets. Some indicators shown in my Saturday message also suggest a stock market that is trying to form a bottom. It will have to do a lot more on the upside to strengthen that view. But it's off to a good start.