Stocks continue to lift this week as the nations top banks passed their respective stress tests and strong economic data continues to stream in. For the first time in years the S&P 500 (chart) closes above the 1400 level. Also, the Nasdaq (chart) on Tuesday closed over 3000, a level not seen in over a decade. The Dow Jones Industrial Average (chart) continues its march north of 13,000 and the small-cap bellwether Russell 2000 (chart) closed in the 830 area. This 830 zone for the Russell has provided significant resistance as of late, so we will see if the this index can breakout like the other key indices have.
There is one other average I am watching to see if this incessant market run can continue, and that is the Dow Jones Transportation Average (chart). Market pundits have argued that during this bull market the transports have lagged and have not really participated in the rally. In fact, this is what the short side has relied on in part to support their short thesis. Historically speaking, when equities are rallying and the transports are not, this is an indication of an imminent reversal for equities. Well in today’s session the Dow Jones Transportation Average (chart) had one of its strongest days of the year. I am looking now for a a meaningful break above the 5400 level in the transports. If this occurs and if the transports can remain above 5400, this could be yet another powerful indicator that supports this bull market.
Good luck to all.