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Dow's recovery pulls S&P and NASDAQ out of a rut

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At 01:34 PM EST, the Dow Industrials (INDU) 10,051 +1.06% had just edged into positive territory at 9,947 and have built gains from there and trades near its session high. The ability to make a firm move above its 200-day moving average has had a positive impact on other market averages.

"Driving" gains in the Dow are shares of automaker General Motors (NYSE:GM) $65.02 +1.35% after GM release its April sales numbers which showed a 13% gain as its trucks and SUV's again proved popular. Ford's (NYSE:F) $16.35 +2.89% April U.S. sales fell more than 7% while DaimlerChrysler's (NYSE:DCX) $46.36 +1.57% sales rose 3%.

What has apparently sparked the markets to recovery mode was GM saying that looking ahead to the 2nd quarter, it's going to ramp up production as demand increases from consumers and rental companies. The company now expects to build 667,000 cars and 853,000 trucks, for a total of 1.53 million vehicles, which would be a 12% increase from last year.

We should also note as previously mentioned that the point and figure chart of the Dow Industrials (INDU) has a bearish vertical count of 9,800 associated with its chart. Monday's low was 9,811 and was close to this level.

Dow Industrials Chart - Daily Interval

The MARKET has responded favorably to GM's comments and has the Dow Industrials (INDU) jumping back above the 200-day. I'm starting to like a bullish index play in the DJX.X at current levels.

I'd take a 1/2 bullish position in the DJX July $100's (DJVGV) at $4.00. No stop and target the 10,500 level for the trade. Only 1/2 position currently as MACD still below zero and has NOT crossed above signal. Still fighting a downward trend also, so lots of work to be done.

Jeff Bailey
Senior Market Technician
Option Investor

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