REGIONAL BANK SPDR EXCEEDS 50-DAY AVERAGE -- LEADERS INCLUDE M&T BANK, BB&T CORP, AND REGIONS FINANCIAL -- JPM IS ANOTHER BANK LEADER -- TRANSPORTS BOUNCE OFF 200-DAY AVERAGE -- WEAK DOLLAR BOOSTS METALS -- STOCK REBOUND STILL HAS FURTHER TO GO
REGIONAL BANK SPDR CLEARS 50-DAY AVERAGE... One of the simplest ways to determine which stock groups, or individual stocks, are leading the market higher is to look for the ones that are clearing their 50-day moving averages first (or stayed above them). Yesterday's message showed the Consumer Discretionary SPDR (XLY) being the first of its class to do that. Financials are right behind. Chart 1 shows the S&P Regional Banking SPDR (KRE) trading above its 50-day line today. Bank leadership makes sense in a climate of rising bond yields. A number of individual banks in that group have actually stayed above the blue line. Charts 2 through 4 show M&T Bank Corp (MTB), BB&T Corp (BBT), and Regions Financial (RF) remaining above their 50-day lines throughout the recent correction. That's pretty impressive. Among larger banks, J.P. Morgan Chase (JPM) is also a market leader. Chart 5 shows JPM staying above its 50-day average. It's also one of the day's most actively traded stocks.
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Chart 1
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Chart 2
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Chart 3
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Chart 4
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Chart 5
TRANSPORTS ARE ALSO BOUNCING OFF THEIR 200-DAY LINE ... All the major stock indexes have found support at or near their 200-day moving averages. The S&P 500 touched that long-term support line on Friday before turning higher. Yesterday's message showed small and midcap indexes doing the same. Chart 6 shows the Dow Jones Transportation Average joining the list. It's even risen back above its 100-day average (green line). That's another encouraging sign for them and the rest of the market. It should also keep Dow Theorists happy. They don't like to see the transports diverge too far from the industrials. The Dow Jones Utility Average is the only Dow average to fall below its 200-day line because of falling bond prices and rising yields.
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Chart 6
FALLING DOLLAR IS BOOSTING COPPER... The daily bars in Chart 7 show the PowerShares Dollar Index (UUP) gapping lower today after a modest rebound. The Dollar Index is meeting resistance at the trendline drawn under its September lows. That's why the formerly green line turned into a red one. A broken support level usually turns into a new resistance level. The falling dollar is giving a boost to commodity prices like gold and energy. Base metals are getting the most benefit. Chart 8 shows the PowerShares Base Metals Fund (DBB) jumping back over its 50-day line today. It's being led higher by a 2% gain in the price of copper. Economically-sensitive commodities may also be getting some support from a bouncing stock market.
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Chart 7
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Chart 8
S&P 500 REBOUND STILL HAS A WAY TO GO ... The hourly price bars in Chart 9 show the S&P 500 still in the early stages of an attempted rebound from last Friday. It remains well below 2727 (last Wednesday's intra-day high) which appears to be its first significant resistance barrier. That would put the SPX in contact with a falling resistance line drawn over its first two peaks. And would also retrace about two-thirds of last week's downturn. [That would also coincide with a test of its 50-day average]. That's where I would expect it to run into some selling. The 10-minute bars in Chart 10 show its three-day rally from last Friday. The SPX appears to be consolidating within that short-term rebound. The first underlying support levels are at at 2637 and 2622. The green Fibonnaci retracement lines show more potential support levels on any pullback from here.
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Chart 9
