Markets put in yet another positive session Thursday as it seems many that have been caught on the wrong side of the trade are now in the process of unwinding. The Dow, S&P 500 and Nasdaq all gained in the .8-.9% neighborhood. For the week headed into Friday the Nasdaq is higher by 2.6%, after the prior weeks 1.3% advance (the last 2 weeks have CLOSED at the top of their weekly ranges recording bullish hammer candles). The S&P 500 and Dow have risen 2.2 and 1.9% so far this week and if these weekly stats stand it would be the second straight week the Nasdaq outperforms and thats a very healthy sign. The Russell 2000 is on a 5 day winning streak and was halted at the 1610 number today, which has given it trouble with resistance there on 1/23-24 and 3/13 previously (one does not want to see this turn into a triple top). The VIX CLOSED below its 200 day SMA which it has been above since mid January and it is a long way from the very round 50 figure which put a stop to an explosive move on 2/6. That day touched 50 and CLOSED just pennies below the round 30 number in an extremely volatile session.

Looking at individual groups Thursday all of the major nine S&P sectors rose, with leadership emanating from the healthcare and utilities with the XLV and XLU rising 1.4%. The XLV is holding the round 80 number well and that is important as it is the bottom line in a bearish descending triangle formation. A sustained move above 83 could prove very strong as it would be the OPPOSITE of what it traditionally does and would catch many off guard and force them to cover shorts. Rounding out the top four groups, were technology and financials as the XLK and XLF advanced by 1.3 and .8% respectively. The XLK is rapidly building the right side of a cup base with a potential trigger of 71.44, which would negate the ugly bearish engulfing candle from 3/13 (notice the doji candle the session before which was good foreshadowing of imminent weakness). Lagging today was the discretionary group as the XLY rose by .4%, but its chart is sporting a bull flag formation and a CLOSE above 105 would carry a measured move to 113.

The transports are a very important overall group to many market participants. For old timers it is crucial in Dow Theory, but just in general when the space is rolling along, pun intended, it speaks good things about the economy. Of course we know that a good economy does not always equate with a good stock market and that is why one should always make decisions based on PRICE action primarily. Below is a best in breed rail play CSX, and how it appeared in our Wednesday 5/2 Game Plan. To start one has to be impressed as this name did not back off as it was the subject of takeover rumors not to long ago. The stock was also stopped cold at the round 60 number initially on 1/16 before seeing a very rapid trip to the very round 50 number just 3 weeks later. It did break above 60 on its most recent earnings reaction on 4/18 before retreating back below it slightly and almost filling in a gap from 4/17. On Wednesday this week it flew past a bull flag trigger of 61 and look for a measured move to 68.

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