STRONG JOBS REPORT BOOSTS STOCKS -- TRANSPORTS CONTINUE TO SHOW NEW LEADERSHIP -- S&P 500 NEARS ANOTHER RECORD -- INSURANCE STOCKS LEAD FINANCIALS HIGHER -- METLIFE NEARS MAJOR UPSIDE BREAKOUT
S&P 500 TRIES TO REGAIN RECORD HIGH ... A surprisingly strong jobs report this morning has given stocks a big boost today. All major indexes are having a strong day with the Nasdaq and small caps in the lead (more on that shortly). Transports are also having an especially strong day which is another positive sign. All eleven stocks sectors are in the black led by energy, cyclicials, financials, and industrials. Weaker sectors include more defensive utilities and REITS. Emerging markets are leading foreign stocks higher, with Chinese stocks in the lead. Bond yields are pulling back today. Chart 1 shows the S&P 500 bouncing off its 20-day average (green line) which puts it in position to regain its recent record move over its September high at 2940.
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Chart 1
TRANSPORTS CONTINUE NEW LEADERSHIP ... Transportation stocks continue to show new leadership. Chart 2 shows the Dow Jones Transportation Average heading up toward another test of its early December peak at 11044. The TRAN rose above its 200-day average at the start of April and has remained above that red line since then. The fact that the group is being led higher by economically-sensitive railroad stocks is another big plus. Today's rally is also being supported by airlines and truckers. A strong transportation group is a sign of a healthy U.S. economy. The Dow Transports have risen twice as fast as the Dow Industrials (5.3% versus 2.2%) over the past month which is a good sign for Dow Theorists who like to see both rising together.
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Chart 2
INSURANCE STOCKS LEAD FINANCIALS -- METLIFE NEARS BREAKOUT ... After lagging behind the rest of the market through most of the first quarter, financial stocks have become new market leaders. Chart 3 shows the Financial Sector SPDR (XLF) heading toward a test of its September high. The KBW Bank Index recently cleared its 200-day line to join the financial rally. Insurance stocks, however, are the week's financial leaders. Chart 4 shows the Dow Jones US Life Insurance Index also nearing last year's high. Individual stock leaders in that group include Lincoln National (LNC) and Metlife (MET). Chart 5 shows Metlife trying to clear its Sepember peak at 48. A close over that chart barrier would be an impressive upside breakout.
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Chart 3
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Chart 4
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Chart 5
S&P 600 SMALL CAP INDEX CLEARS ITS 200-DAY LINE... Previous messages showed the Russell 2000 Small Cap Index clearing its 200-day line to turn its trend higher. Chart 6 shows the S&P 600 Small Cap Index ($SML) trading over its 200-day line today. A close above the red line would be the first one in seven months. And would confirm that small cap stocks are on the rise. Last Friday's message suggested that small caps were getting a boost from rising financial stocks which are the biggest sector in that group. Financials became the market's strongest sector over the last month. Which is when small caps also started to rise.
