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Dow Bull

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In the first chart, courtesy of rising stock prices are confirmed by rising On Balance Volume, meaning that there is conviction behind the buying.

The first quarter earnings report season is rapidly approaching. Most U.S. company news has entered a quiet period with corporate announcements at a minimum. The exceptions are companies with negative surprises, which will be rare this quarter. Cash flow and earnings have recovered significantly from the first quarter of 2009.

First quarter gains will be impressive. Earnings on a year-over-year basis by the Dow Jones Industrial Average will increase for 25 of the 30 companies, nearly 90%. The average gain will be 10.4%. Notable on the list of companies expected to report year-over-year gains in excess of 40% include heavy hitters such as 3M, Alcoa, American Express, Chevron, Cisco, Dupont, Intel and JP Morgan. The following are first quarter 2010 estimates of earnings per share (EPS) for the thirty companies that make up Dow Jones Industrial Average, followed by EPS one year ago:

1.17 vs. 0.81

0.17 vs. a loss of 0.59

American Express
0.62 vs. 0.32

0.54 vs. 0.53

Bank of America
0.09 vs. 0.52

0.87 vs. 0.87

0.42 vs. 0.39

1.68 vs. 0.72

0.34 vs. 0.23

Coca Cola
0.74 vs. 0.65

1.01 vs. 0.54

1.30 vs. 0.92

General Elect
0.15 vs. 0.26

1.05 vs. 0.86

Home Depot
0.38 vs. 0.35

0.37 vs. 0.11

1.94 vs. 1.70

1.27 vs. 1.26

JP Morgan
0.64 vs. 0.40

Kraft Foods
0.46 vs. 0.40

0.96 vs. 0.83

0.78 vs. 0.74

0.43 vs. 0.39

0.53 vs. 0.54

0.81 vs. 0.83

1.48 vs. 1.34

United Technology
0.91 vs. 0.87

0.56 vs. 0.63

0.85 vs. 0.77

Walt Disney
0.45 vs. 0.43

The Dow Jones Industrial Average is breaking out above its January high at 10729 and is targeting the 11200 area as long as 10725 holds. 50, 100 and 200 day moving averages are in sync and On Balance Volume supports the bull move. Seasonality favors higher highs: For the last 20 years the DOW has risen an average of 5% between the end of March and June 1. The advance decline line supports higher stock prices (second chart.)

The S&P Index of 500 companies stocks confirms the bull. Another 15 S&P 500 stocks broke resistance on March 17 (Apollo, CB Richard Ellis, Clorox, Comerica, Gap Stores, Intel, Life Technologies, Lincoln National, Norfolk Southern, O'Reilly Auto, Simon Properties, Vulcan and Wynn Resorts) and none broke support. The Up/Down ratio increased from 3.57 to (344/90=) 3.82.


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