SOX SINKS -- GOLD AND SILVER STOCKS SHINE -- MARKET STAYS IN TRADING RANGE
ATLANTIC CITY MONEY SHOW... I spent Thurday and Friday at the Atlantic City Money Show. While there, I had a chance to speak with many of our members who were kind enough to come up and say hello. That's always the nicest part of appearing at these shows. It's also a great opportunity to get feedback on how we're doing and also to answer some questions about the markets and the type of services we provide. Marketwise, not a lot happened while I was away. The NYSE market stabilized a bit, while the Nasdaq lost more ground. The bond market also stabilized from a deeply oversold condition. There were two market groups, however, whose actions were noteworthy. Gold and silver stocks jumped sharply. Unfortunately, chip stocks went in the other direction.
SOX INDEX BREAKS 50-DAY LINE... The Semiconductor (SOX) Index took a hit on Friday that pushed that technology bellwether index far beneath its 50-day moving average. The SOX also broke its July low, which turns its short-term trend lower. The next downside target is its June low. A large part of that decline was influenced by a plunge in Nvidia.
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NVIDIA PLUNGES ON FRIDAY... Although this stock isn't actually in the SOX Index, it does have some influence on the chip sector. Its plunge on Friday was the biggest catalyst in the falling SOX. NVDA has been falling for weeks. On Friday, it gapped below its 200-day moving average on very strong volume. That's a bad combination. Novellus was another chip casualty. That SOX component fell to the lowest level in ten weeks. Its next potential support level is the 200-day moving average. The fall in the SOX played a big role in the continuing decline in the Nasdaq market.
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NASDAQ CONTINUES TO CORRECT... The Nasdaq had a relatively poor week. It broke its July low and its 50-day moving average. As the daily chart shows, the next potential support level is its June low near 1600. The MACD lines are still negative; and the 14-day RSI line hasn't reached oversold territory. The broader market is still in a sideways trading range.
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S&P 500 STILL IN TRADING RANGE... Although it remains beneath its 50-day average, the S&P 500 has stayed above its early July low. That keeps the index in a sideways trading range. Friday's bounce was on very light volume. Hamburgers and gold helped boost the S&P on Friday.
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MCDONALDS HITS 11-MONTH HIGH... The daily chart shows McDonalds hitting a new recovery high on strong volume on Friday. That was enough to push the stock to an eleven-month high. Its monthly chart, however, shows that it's going to have to sell a lot more hamburgers and fries to reverse its major downtrend. There's some overhead resistance at 25 and lot more near 30. Maybe the jump in MCD had more to do with its goldern arch. That's because gold stocks had a very impressive Friday.
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FREEPORT MCMORAN LEADS GOLD SURGE... Gold stocks jumped 5% on Friday. One of the most impressive moves was seen in Freeport McMoran Copper & Gold. The metal stock has been in an uptrend and hit a new closing high on Friday -- on strong volume. Its monthly chart is even more impressive. It shows the stock trading at the highest levels in more than five years. That looks like a bull market to me. FCX is getting a double boost -- one from gold and one from copper. Both commodities are rising. The AMEX Gold Bugs Index (HUI) hit a new 6-year high on Friday. [Newmont Mining hit another multi-year high]. The XAU may be getting close to a major breakout as well.
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XAU HITS 52-WEEK HIGH... The XAU Index has been lagging behind the HUI Index because it includes gold stocks that still hedge their gold production. However, the XAU jumped to a new 52-week high on Friday and appears primed to challenge the high reached during the spring of 2002. A decisive close above that level would confirm the major bullish breakout in the gold/silver group. Its monthly chart shows that the XAU appears to be in the final phase of a major bottoming formation. The recent bullish breakout in silver prices to a three-year high is also giving a boost to the precious metals sector.
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SILVER LEADERS... We haven't said much about silver stocks. With silver prices on the rise, however, silver stocks are beginning to shine as well. Hecla Mining has broken through the highs of the past two years to achieve a bullish breakout. Apex Silver Mines appears close to doing the same. Notice the big volume bars during the recent surge in both silver stocks. That's a good sign. At the Atlantic City Money Show, I heard little or no interest in gold stocks from the Wall Street community. I take that as another good sign.
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