AIRLINES LEAD TRANSPORTS AND INDUSTRIAL SPDR TO NEW RECORDS -- DELTA AND AMERICAN AIRLINES RISE ABOVE 200-DAY LINES -- AUTOS AND HOMEBUILDERS LEAD CYCLICALS HIGHER -- HOME CONSTRUCTION ISHARES HIT NEW HIGH
AIRLINES TAKE OFF... Airlines stock are finally gaining some altitude. Previous messages have shown rails, truckers, and delivery service stocks leading the Dow Transports to record highs. My September 20 message described airlines as the weakest part of that sector, but showed them in an oversold condition and trying to stabilize. Airlines are today's strongest group. Chart 1 shows the NYSE Airline Index ($XAL) climbing more than 3% to the highest level in nearly two months. The XAL is now back above chart support formed last March. Not only are airlines leading the Dow Transports into record territory, they're doing the same for the Industrial SPDR (XLI). The five top percentage gainers in the XLI are airlines. The strongest is Delta (+6%). American Airlines and United Continental have gains of more than 5%. Chart 2 shows Delta (DAL) rising back above its 200-day moving average. American Airlines (AAL) is doing the same.
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Chart 1
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Chart 2
AUTOS AND HOMEBUILDERS LEAD XLY HIGHER ... Chart 3 shows the Consumer Discretionary SPDR (XLY) rising above its September peak to a two-month high. The XLY has been one of the year's weakest sectors, primarily due to a weak retail group (which is starting to strengthen). Today's XLY leaders, however, are autos and homebuilders. The brown bars above Chart 3 show Home Construction iShares (ITB) rising to the highest level in ten years. Home improvement stocks are also strong. Auto-related stocks have also been rising. The Dow Jones Auto Parts Index has risen to a new record. Car makers are also rising.
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Chart 3
FORD IS PLAYING CATCH UP ... Auto stocks in general are having a good year. The Dow Jones Automobile Index ($DJUSAU) is trading at the highest level in three years. General Motors (GM) has rising to a record high. Fiat Chrysler (FCAU) has done the same. Ford has been the laggard in the group. But it may offer the best value. And it's starting to catch up. The daily bars in Chart 4 show Ford (F) surging to the highest level in more than six months. It gets even better. The weekly bars in Chart 5 show Ford also rising above a falling resistance line extending back three years to 2014. Its 14-week RSI (top of chart) has risen to the highest level in three years; and its weekly MACD lines (below chart) appear to be bottoming. Normally, I favor the strongest stocks in any group. Sometime, however, it pays to look for bargains. Especially with the recent focus on stocks that are perceived as being relatively undervalued. And are in a strong stock group like the autos.
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Chart 4
