FUND LEADERS FOR THE PAST WEEK FAVOR COMMODITY-RELATED AREAS

FIDELITY SELECT GOLD IS NUMBER ONE FOR THE WEEK... It should come as no surprise to find that last week's sector mutual fund leaders were in commodity-related groups like gold and industrial materials. We showed several charts last week of individual stocks in this area breaking out to new 52-week highs that included chemicals, copper, and gold. With both gold indexes that we follow -- the XAU Index and the HUI Index -- hitting 52-week highs, it's not surprise to see gold funds in the week's top spot. Chart 1 shows Fidelity Select Gold moving up to challenge the highs of the past two years. The formation looks like an "ascending triangle" which is a bullish pattern. On relative strength grounds, gold stocks are turning up as well. Gold remains our number one sector pick.

Chart 1

FIDELITY INDUSTRIAL MATERIALS WAS ALSO STRONG... Fidelity Select Industrial Materials was the next best performer among sector funds. Chart 2 shows that fund moving up to a new 52-week high last week. Its relative strength line is also moving up. Two other sector funds that showed up in the top five were chemicals and paper & forest products.

Chart 2

CANADA IS TOP INTERNATIONAL PERFORMER... When commodity-related stocks (and their commodities) are rising, that's normally good for Canada, which is a big producer of commodity products. That explains why Canada took the top spot last week among Fidelity's international funds. Chart 3 shows Fidelity's Canada Fund trading near the highest levels in three years. Toss in a strong Canadian Dollar and Americans have a potentially winning combination.

Chart 3

MONDAY'S SECTOR LEADERS... Biotech stocks are one of the top sectors in Monday's trading. The BTK is up 2% today and is bouncing off its 50-day moving average. The Semiconductor (SOX) Index is also showing good relative strength. The SOX has bounced twice off its 50-day line over the past week. Healthcare is the day's top group. Chart 6 shows the Morgan Stanley Health Care Provider Index rising to a new eight-month high. Its relative strength line also appears to be turning up.

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BOND YIELDS CLOSE AT ELEVEN-MONTH HIGH... Long-term rates continue to advance. The yield on the 10-year T-note hit 4.28% today, which is the highest level in eight months. It's also the first close over 4.25% since last August, which was eleven months ago. That's bad news for bondholders. As we suggested last week, we think there's a correlation between rising bond yields and industrial materials. Chart 8 shows Industrial Metals prices hitting a new 52-week high today. That includes economically-sensitive commodities like aluminum and copper. [Silver, which is an industrial and a precious metal, is trading over $5.00 for the first time in a year]. Strengh in those commodities also explains why industrial material and precious metal stocks have been doing so well of late.

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Chart 8