The DJIA took the baton from the NASDAQ today and raced to a new recovery high on the legs of Boeing (BA) and Caterpillar (CAT) as investors continued to rotate out of technology stocks and into cyclicals. Kicking off the rally was the President extending jobs benefits over the weekend as Congress went back to the bargaining table to hammer out another relief package. Energy (XLE), Industrials (XLI) and Materials (XLB) outperformed, while Communication Services (XLC), Technology (XLK) and Healthcare (XLV) closed in the red. Investors were ‘risk on’ as casinos and airlines were two of the strongest Industry Groups. MGM Resorts International (MGM) jumped +13.77% after IAC/Interactive opened a 12% position in the company, and shares of Las Vegas Sands (LVS) and Wynn Resorts (WYNN) were also sharply higher, moving in tandem. The DJ Transportation Index outpaced the broader market on strength in United Airlines (UAL) and Delta Airlines (DAL) after TSA checkpoint data showed an uptick in passengers and Congress indicated support for additional aid for the industry. United Parcel Service (UPS) and FedEx (FDX) also broke out to new 52-week highs helping boost the transportation index +2.73%. The DJIA jumped higher for a sixth-straight session gaining 357.96 points (+1.30%) to 27791.44, while the S&P 500 traded up for a seventh-straight day adding 9.19 points (+0.27%) and closing at 3360.47. The NASDAQ slipped for a second consecutive day on profit taking in the FANG stocks dropping 42.63 points (-0.39%) to 10968.36.

Breadth was bullish with advancing issues beating declining issues 2.6:1 on the NYSE and 1.5:1 on the NASDAQ. Advancing volume was 76% on the NYSE and 64% of the NASDAQ. VIX eased 0.08 (-0.36%) and finished at 22.13. Crude oil prices jumped 0.80 (+1.94%) and the September contract closed at $42.03 a barrel. Gold added 7.10 (+0.35%) and closed at $2035.10 an ounce.

The bulls had to like the action today as the Dow and S&P 500 trek closer to new highs and the NASDAQ consolidates its gains. The market leadership has changed quickly without the major averages losing ground and that’s a positive going forward. The market internals also point to higher prices but the market is once again overbought with the S&P Short Range Oscillator (SRO) closing at +5.62%. That could lead to some backing and filling after the market’s run, but the stock market can stay overbought for a while.

Earnings releases to watch for on Tuesday include: Canada Goose Holdings (GOOS), HUYA Inc (HUYA), Nio Inc (NIO), Staffing 360 Solutions (STAF), Super Micro Computer Inc (SMCI) and XP Inc. (XP).

Tuesday’s Market Moving Economic Calendar: Small Business Optimism Index and PPI-Final Demand.

By David L. Blake, CMT