GDP Growth Revised Upward, Markets Rally, Energy Pulls Back

The S&P has broken through the horizonal resistance from the January/February highs, the 3o and 20 DMA's and is at the R1 resistance of the May 21 large black candle. The Nasdaq Composite has broken through the R2 and R3 resistance levels on its May 21 large black candle and is breaking through its 20 DMA. The Russell 2000 the strongest of the indices is breaking through its 200 DMA is actually making a new high as we write. This breakout of the 747.99 level gives the Russell a price target of 776.61. It is currently at 749.27. Also the potential Head and Shoulders top has disappeared with today's rally. The DJIA is breaking through its 50 DMA and is at the R1 resistance level of the May 21 large black candle. The Dow is still below its 20, 30 and 200 DMA. To the question I posed in yesterday's post of whether the strong rally in energy and basic material stocks was a sector specific rally or would lead the broader market higher, it certainly seems at this moment to be leading the broader market higher. Many energy and basic material stocks are pulling back today after yesterday's strong rally. This rally seems to be gaining strength from the Commerce Department's revised GDP growth of the first quarter of 0.9% that was released this morning, up from the initial estimate of 0.6% growth. For the past several months in our audio commentary we have consistently pointed out how Fed stimulus of lowering interest rates has historically taken 6 to 9 months to begin to have an impact on the economy. While the news on the economy has been very negative, it seems we are just beginning to see the impact of rates that were begun last August to September. Don't be surprised if the news gets better over the next few months.