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Indexes see gains with strength in Banks and Transports

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Early morning weakness has turned to fractional strength with the Dow Industrials (INDU) 8,386 +0.42% extending yesterday's gains with a 35-points gain, while the broader S&P 500 Index (SPX.X) 890 +0.53% reaches a session high as transports as depicted by the Dow Transportation Average (TRAN) 2,299 +3% jumps above its longer-term 200-day SMA for the first time since July 2002.

In last night's Index Trader Wrap, equity bulls wanted to see the S&P Banks Index (BIX.X) 281 +1% continue to exhibit bullishness to help boost the S&P 500 and S&P 100 Index (OEX.X) 451.94 toward their WEEKLY R1 levels of resistance, and bulls are getting exactly what they wanted to see from this financial group along with KBW Bank Index (BKX.X) 770 +1.3%, Securities Broker/Dealer (XBD.X) 418 +1.35% and S&P Insurance (IUX.X) 250 +0.8%, on market theory that broader market bullishness can be found when financial sectors shows strength.

Current trade has the S&P Banks Index (BIX.X) now threatening its "neckline" from the reverse head and shoulders pattern.

S&P Banks Index Chart - Daily Interval

Today's further gains from the BIX.X hasn't necessarily "turned the markets around," but has certainly given bulls a reason to show some confidence. From here, a break above the 281.52 level looks to have bears running for cover as they assess further upside risk to the 285 level. Such a move from the BIX.X most likely as the early April highs of 904 in the SPX and 460 level for the OEX in play, if not their WEEKLY R1s.

While the S&P Banks Index (BIX.X) gives us the view that the MARKET is giving some type of bullish thoughts to the underlying "financial" well-being of the U.S. economy, today's jump higher in the Dow Transports (TRAN) gives bullish observations that an industrial, if not cyclical sector is garnishing bullish capital on forward thoughts of an increase in shipping activity. I say this as it relates to recent comments regarding Dorsey/Wright and Associates "transportation/non-air" bullish % (BPTRAN) having reversed up into "bull confirmed" status back on March 18 to 40% and building to 51.3% as of yesterday's close.

Early buying in Treasuries has seen a morning reversal, but the major maturities in the 5, 10 and 30-year still hold fractional gains. Current stock market action hints that some of the recent two-days selling in Treasuries has some of that cash finding its way into stocks and late-morning selling back into the 10-year bond has its YIELD ($TNX.X) at 4.003% rising back above its WEEKLY pivot.

Jeff Bailey

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