Daily Index Charts plus Bonus

May 18, 2007: 1:15 PM CST

While 8 of the 10 items in the index of leading economic indicators registered negative, the market took it in stride and has continued its creeping trend higher.  Here are charts of the major indexes:

dow-may-18.png

russell-may-18.png

nas-may-18.png

Again, the Dow has held up the strongest in terms of relative strength.  To illustrate this point,  here is a relative strength percentage graph of the DIA (Diamonds – Dow Jones ETF) and IWM (Russell 2000 ETF)

dow-to-russell.png

Although the Russell outperformed the Dow for most of the year, since May, the large cap Dow has shown considerable relative strength as compared to the smaller cap index.

Relative strength is an illustrative concept studied by many technicians of intermarket relationships.  The technique can also be used to show strong and weak stocks within a given sector or industry group. A market analyst can use basic support/resistance and trendlines to highlight early changes to a particular relationship.

Notice the clear change in dominance that occurred in May with the Dow ‘breaking out’ of resistance and signifying a shift in trend, confirming the flight to quality at least in the short term.

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