STOCK ADVANCE CONTINUES AS 50-DAY AVERAGES HOLD -- 200-DAY AVERAGES ARE NOW IN SIGHT -- EMERGING MARKETS ISHARES REACH SEVEN-MONTH HIGH AND ARE CHALLENGING 200-DAY AVERAGE -- CONSUMER DISCRETIONARY SPDR IS ALSO CHALLENGING ITS 200-DAY LINE
MAJOR U.S. STOCK INDEXES HEAD TOWARD 200-DAY AVERAGES ... My Wednesday message expressed concern that several stock indexes were in danger of falling back below their 50-day averages, which would have put their January rebound in jeopardy. As today's first three charts show, however, the blue 50-day lines have held and the January rebound is continuing. All three major stock indexes now appear headed toward their 200-day averages (red arrows). The first two charts also show the Dow Industrials and S&P 500 nearing a test of down trendlines drawn over their October/December highs. Chart 3 shows the Nasdaq Composite Index already exceeding its down trendline. It's encouraging to see today's rally being led higher by materials, cyclicals, industrials, energy, and technology. Small caps and transports are also ending the week on a strong note. Defensive groups like consumer staples and utilities are lagging behind. A weaker dollar is continuing to lift precious metals. Industrial metals and energy prices are also rebounding along with their respective stocks. The weaker dollar is also helping lift emerging markets which have been leading the January rebound. Most of those EM gains today are coming from Asia.
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EMERGING MARKETS ISHARES CHALLENGE 200-DAY AVERAGE ... Emerging markets were the last year's weakest stocks. In a reversal of roles, however, they've been leading the January rebound in global stocks. Chart 4 shows the MSCI Emerging Markets iShares (EEM) jumping to the highest level since the end of September, and in position to close above its 200-day moving average (red line) for the first time since last June. Most of today's gains are coming from Asian markets in China, South Korea, and Taiwan. That would be a positive sign for EM markets and global stocks in general. Emerging market currencies are also rising.
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CONSUMER DISCRETIONARY SPDR RETESTS 200-DAY LINE... Wedneday's message showed the Consumer Discretionary SPDR (XLY) backing off from its 200-day average. Chart 5, however, shows the XLY jumping today and in position to challenge that red resistance line again. That's an important test for it, and possibly for the rest of the market. The XLY/SPX relative strength ratio (upper box) shows the XLY leading the rest of the market higher. That's usually a good sign for both.
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INTEL DISAPPOINTS... Semiconductors had a very strong day yesterday. That included Intel (INTC) which ended the day above its 200-day moving average as shown in Chart 6. The stock plunged in after hours trading, however, after a revenue miss and weaker outlook for 2019. Chart 6 shows the stock gapping below both moving average lines in today's trading. Despite that setback, the semiconductor group is gaining more ground today to build on yesterday's impressive gains.
