Dr. Kris'  Instablog

4:00pm ET: As predicted the Dow Transport Index followed through on yesterday's sell-off and lead the rest of the pack on the way down. Internals are growing increasingly bearish as evidenced by a rising VIX and Trin. In addition, many individual issues that have enjoyed big gains during the spring rally showed signs of weakness as buying pressure virtually dried up (re: topping tails for you technicians). For the bulls to stay in power, though, a little respite is required, so don't you bears start nipping from the honey pot just yet!

Today's Trade Highlights: A Yen for Japanese Stocks
Today's biggest news occurred in the currency markets which saw some big ups as well as big downs. On the upside, the greenback (UUP) jumped by 1%. I know that doesn't sound like much but in the currency realm, that's a huge move. Correspondingly, international bond funds WIP, BWX, IGOV, and BWZ all shed 1% of their values. Continued upside in the US dollar was forecast by Keith McCullough of Hedgeye and reported here on 4/29 (scroll down to view).

On the flip side, the Japanese Yen (FXY) broke recent support at $98.50. Judging by the triple topping tail (see above weekly chart of the FXY), further downside is in the cards. The exchange traded issue has support at the $5 levels making $95 it's next test. Considering Japanese Prime Minister Abe's vow to weaken the currency, I think it's entirely possible we'll see a retest of the 2008 low at $90.

Although this is bad for folks long the currency, it's good (in general) for most Japanese companies. We mentioned taking long positions in Japanese stocks in the March 11th and April 11th blog posts. Today we're adding two more stocks to the list: Fuji Heavy Industries (FUJHY)and Softbank (SFTBY). The former company is involved in the automotive, aerospace, and industrial machinery industries while the latter is a telecom and internet service and equipment provider. Fuji's stock chart has been a rising juggernaut and continues to hit new highs; Softbank's rise hasn't been so smooth but it leapt to a new high today gaining nearly 6%. As always, please do your own research before investing in any stock.

For those of you who would prefer a basket of stocks, consider the Japan country fund (EWJ, $11.76) or better yet the Wisdomtree Japan Hedged Fund (DXJ, $49.20) which has the advantage of being able to hedge against Yen/Dollar fluctuations. Comparing the two, the EWJ has gained nearly 40% (which ain't too shabby!) since the November low while the DXJ rose almost 60%. Both vehicles currently yield over 1% and both offer options.

That's it for now. Sayonara until tomorrow.

4:00pm ET Another banner day for the bulls as the S&P 500 (SPX), the Nasdaq, and, most importantly, the market-leading Dow Transport Index (DTX) reached all-time highs. Both the small-cap Russell 2000 (RUT) and the Dow Industrials (DJIA) are having problems breaking through near-term resistance. For the Russell that level is at 960 and for the Dow it's 15000. Leadership from the transports is indicating that these resistance levels may be toppled as early as tomorrow. Both the VIX (volatility index) and the Arms Index (Trin) indicate that this market still has room to run in the short-term.

Today's Notable Market Action: Airlines continue to soar
Domestic airlines continue to fly higher and technically show no sign of leveling off. It seems as if there's an etf for virtually everything and one would think there would be one for the airlines. Well, Guggenheim did have one (ticker symbol FAA) but they closed it a couple of months ago. So, the only way to get in on the action is to buy the individual names.

Most of the airline issues are now trading at P/E's on par with the S&P 500's P/E (15-17 range).Southwest Airlines (LUV) P/E is 28, quite a bit higher than the rest of the field. I'm not sure why this is so; they may be better at hedging their fuel costs and expanding margins but this is just a guess. Although LUV's chart is still very bullish, I'd rather pack my money into Alaska Air (ALK). The company sports one of the lowest P/E's (15) in the industry and technically it has a great looking chart. Today, the stock broke out to a new all-time high on twice normal volume. As always, please do your own due diligence and know your risk tolerance before investing.

Subscriber Notes: There are two new Stock Darlings.

4:00pm ET Better than expected employment data was all that was needed for the S&P to break through the 1600 which has been a source of recent resistance. In so doing, it made a new all-time high as did the Dow Industrials (DJIA) and the small-cap Russell 2000 (RUT). The fact that the Dow Transports (DTX) lead the way is great news for the bulls because we need this index to lead the charge onward and upward. Despite today's 5% drop in the volatility index (VIX), it still has further room to fall giving the rally more room to grow.

Since we're now in uncharted territory, where is the next point of resistance? Well, 2014 earnings on the S&P are projected to be $110. Using the historical P/E ratio of 15 gives a price target of $1650, roughly 2.2% above today's close ($1614). Using a high-end P/E of 17 gives a target price of $1870, or 16% above the current level. We could make it there eventually but I do think the market is overdue for a pull-back. We'll probably get one when it reaches the $1650 level--or when the $VIX drops below 12, whichever comes first.

That's it for today. Off to a meeting. Enjoy the weekend!

The Derby Trade: Don't buy the horse, buy the racetrack!
The Kentucky Derby is tomorrow and if you're itching to play the ponies, why make a risky bet when there's a much safer one? Everyone knows that Churchill Downs (CHDN, $80) hosts the venerable race but few know that it is a publicly traded company. Its stock performance has been stellar: Since 2009 shares have risen 167%! Although the company missed recent quarterly estimates, the stock was able to brush off the bad news by hitting a new high today. Management has ambitious expansion plans--a racetrack/casino complex near Cincinnati and a casino acquisition in Maine. The company pays a 1% dividend and there are options. Mint juleps are extra.

Subscriber Notes: There is one new Stock of the Day.