MAJOR STOCK INDEXES BUILD ON LAST WEEK'S GAINS -- HEALTHCARE PROVIDERS LEAD HEALTHCARE SPDR HIGHER LED BY UNITEDHEALTH -- RECORD HIGH BY JP MORGAN CHASE LEADS BANKS AND FINANCIALS HIGHER -- FALLING VIX ALSO SUPPORTS HIGHER STOCK PRICES

MAJOR STOCK INDEXES BUILD ON RECENT GAINS...After a modest pullback yesterday, major U.S. stock indexes are building on last week's trade-inspired gains.  Chart 1 shows the Dow Industrials trading at the highest level of the month this morning.  The Dow appears headed toward the top of a triangular formation defined by the two converging trendlines drawn from its July high and August low.  Triangles are usually "continuation" patterns which favor higher prices.   In addition, the Dow's 14-day RSI (upper box) is above 50; and its daily MACD lines (lower box) are turning positive for the first time this month (green circle).  Charts 2 and 3 show the same positive price action for the S&P 500 and Nasdaq Composite Index.

Eight of eleven stock sectors are gaining today with the biggest morning gains in healthcare and financials.  Defensive stocks like real estate, staples, and utilities are lagging behind.  That suggests a more optimistic mood among stock investors.   Foreign stocks are also trading higher.   Our main focus today is with the day's two strongest sectors.

HEALTHCARE PROVIDERS LEAD XLV HIGHER...Chart 4 shows the Health Care SPDR (XLV) gaining nearly 2% today which makes it the day's strongest sector.  So far this year, healthcare has been the market's second weakest sector with only energy doing worse.   Chart 4, however, shows the XLV rising above both moving average lines and nearing a test of its September high.  Its RSI and MACD lines have also turned positive.  Healthcare providers are the biggest contributor's to today's XLV gains.

UNITEDHEALTH LEADS HEALTHCARE PROVIDERS...Chart 5 shows the Dow Jones US Healthcare Providers Index surging more than 5% today. Its short-term momentum indicators have also turned higher.  The fact that this month's upturn is starting from just above its April low suggests that a bottom is being formed.  The same is true of Unitedhealth Group (UNH) which is leading that group higher today.   Chart 6 shows UNH jumping nearly 8% today.   The stock has cleared its 50-day average and appears headed for a test of its 200-day line.  Its chart also has the look of a potential double bottom being formed between its lows formed in April and October. See two circles in Chart 6 marking the stock's last two bottoms.   Other healthcare providers gaining today include Anthem (ANTM), Cigna (CI), Humana (HUM), and Centene (CNC).

NEW RECORD BY JP MORGAN LEADS BANKS HIGHER...Chart 7 shows the Financial Sector SPDR (XLF) climbing to a new high for the month today.  The XLF is one of the day's strongest sectors and appears headed toward a test of its July/September highs.    Thanks mainly to rising bank shares which appear to be doing the same.  Chart 8 shows the KBW Bank Index (BKX) gaining more than 2% today to reach a new monthly high as well.   The BKX is being led higher by JP Morgan Chase (JPM) after that bank reported a strong third quarter.  Chart 9 shows JPM breaking through its September high to reach a new record.

VIX INDEX NEARS SEPTEMBER LOW... Chart 10 shows the CBOE Volatility (VIX) index falling below 14 today which is the lowest level since mid-September.  A falling VIX usually accompanies rising stock prices.  The failure of its October rebound to clear the 20 level, and the fact that its September high fell well short of its August high is another positive sign for stocks (see falling trendline).