STRONG HOUSING DATA GIVES HOMEBUILDERS AND STOCKS A BIG LIFT -- BANKS HELP LEAD FINANCIALS TO ANOTHER STRONG DAY -- TECHNOLOGY SPDR TURNS UP AS SEMICONDUCTORS NEAR UPSIDE BREAKOUT -- NASDAQ INDEXES CLEAR MOVING AVERAGE LINES

HOME CONSTRUCTION ISHARES CLEAR MOVING AVERAGES ... April new home sales surged to the highest level since 2008. That followed on the heels of last week's report of strong existing home sales. The prospect of newer homes being built is good for homebuilders, the economy, and the stock market. And that good news is being reflected in today's trading. Chart 1 shows the U.S. Home Construction iShares (ITB) surging more than 3% and climbing back over its 50- and and 200-day moving averages. The ITB/SPX relative strength ratio has started to climb again. That ratio shows homebuilders leading the market higher between February and April -- and starting to do so again.

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Chart 1

FINANCIALS ARE HAVING A STRONG DAY ... All ten stock sectors are in the black today. Financials are one of the strongest. The daily bars in Chart 2 show the Financial Sector SPDR (XLF) trading at a three-week high after bouncing off its moving average lines. The XLF/ SPX ratio (top of chart) continues to lead the market higher after turning up in early April. Some of that has to do with the recent rebound in interest rates that has given a lift to banks, brokers, and insurers. All three are rising again today. Chart 3 shows the S&P Regional Bank SPDR (KRE) near a five-month high after recently clearing its 200-day moving average. Its relative strength ratio (top of chart) is at a five-month high. Regional banks benefit more from rising interest rates. An improving housing sector also helps banks. More home sales mean more mortgages.

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Chart 2

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Chart 3

TECHNOLOGY SPDR LEADS MARKET HIGHER... Another good sign for the market is that it's starting to get new leadership from the technology sector. Chart 4 shows the Technology Sector SPDR (XLK) surging to a new high for the month. After finding support along its 200-day average, the XLK is close to overcoming its 50-day line. In addition, its 14-day RSI line (top of chart) has cleared its 50-line; and its daily MACD lines (below chart) have turned positive (see circles). Semiconductors are helping lead the tech sector higher.

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Chart 4

SEMICONDUCTOR ISHARES NEAR UPSIDE BREAKOUT... Semiconductors are a big reason why the technology sector is rallying. Chart 5 shows the PHLX Semiconductor iShares (SOXX) nearing a test of a resistance line drawn over its December/April highs. An upside breakout appears likely. The SOXX/SPX ratio (top of chart) is nearing an upside breakout as well. That's also helping turn the Nasdaq market back up again.

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Chart 5

NASDAQ INDEX CLEARS MOVING AVERAGE LINES... My weekend message suggested that the Nasdaq market appeared poised for an upturn. The key, however, would be the ability of the Nasdaq Composite Index ($COMPQ) to clear its moving average lines. Chart 6 shows the COMPQ doing that today. It is also rising more than the S&P 500, as shown by the rising $COMPQ/SPX ratio (below chart). The Nasdaq 100 (QQQ) has also cleared its moving average lines. As I suggested on Saturday, an upturn by the tech-dominated Nasdaq market has given a lift to the rest of the market. Smaller stocks are doing even better.

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Chart 6

SMALL CAPS SHOW RELATIVE STRENGTH ... Another positive side of today's stock rally is the stronger performance of small caps. Chart 7 shows the S&P 600 Small Cap Index ($SMH) up nearly 2% today and bouncing strongly off its 200-day average. The SML/SPX ratio (top of chart) is climbing as well. The Russell 2000 Small Cap Index ($RUT) is also having a strong day. Chart 8 shows the RUT trading back over its moving average lines. The RUT has also exceeded a falling trendline drawn over its June/December highs. The RUT/SPX ratio (top of chart) has bottomed as well. Because of the way the two small cap indexes are constructed, the SML usually rises faster than the RUT. That's why it's encouraging to see the more broadly-based RUT turning up (which also boosts market breadth). That's a good sign for the entire market.

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Chart 7

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Chart 8

RISK ASSETS RISE AS HAVENS DROP... Stock markets around the world are having a strong day, which suggests that the recent pullback may have bottomed. Bond prices are selling off as bond yields climb on a strong housing report. A firmer dollar and rising stock prices are causing profit-taking in gold. Economically-sensitive commodities like copper and oil, however, are up today. That makes for a good day in risk assets, and a down day for for safe havens.