XAU INDEX HITS MULTI-YEAR HIGH - BASIC MATERIALS SHOWING LEADERSHIP -- SO IS THE NASDAQ
GOLD STOCKS STILL SHINE... The two indexes of gold stocks that we track are now in confirmed major bull markets. The AMEX Gold Bugs Index (HUI), which includes only unhedged gold stocks, has been trading at a multi-year year for some time. The PHLX Gold/Silver (XAU) Index, however, had been lagging behind. Not anymore. Today's jump in the group has pushed the XAU Index over its early 2002 to register a big bullish breakout. That puts the XAU at the highest level in four years. Precious metal stocks remain my number one sector peak -- as they've been for months. Strangely, there's little discussion about gold in the financial media. Take that as a good sign. Gold prices rose $4.00 today to close at $367. A move over $370 would put bullion above its July peak and would set the stage for an eventual test of its spring 2003. Gold stocks arent't the only commodity stocks that are rallying. Basic material stocks have been rising as well.
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BASIC MATERIALS ARE RISING... I've pointed out several times over the past few weeks that commodity-related stocks are rising. That includes aluminum, copper, paper & forest products, etc. That strong performance is reflected in the Materials Select SPDR which hit another 52-week high today. Its relative strength line (along the bottom) has jumped since the start of July, which also reflects the superior performance by this group. I take that as sign of economic strength. Unfortunately, rising basic material prices are usually associated with rising interest rates. That helps explain why long-term rates have jumped so sharply since July. Good news for commodity stocks usually translates into bad news for bonds.
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ENERGY REBOUND... Energy stocks have started to rebound as well. The Energy Select Sector SPDR has just risen above its 50-day moving average and is nearing a two-month high. The relative strength line along the bottom has turned up for the first time since late May.
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NASDAQ NEARS SUMMER HIGH... The Nasdaq Composite has broken its five-week down trendline and is nearing a challenge of its summer high. Needless to say, a close through that chart barrier would be a positive development for the entire market. That's because relative strength by the Nasdaq is usually a sign of market strength. Its relative strength line versus the S&P 500 has started rising again. That means that investors are buying techs and smalls caps again. Small cap indexes are already at 52-week highs.
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NETWORK APPLIANCE LEADS NASDAQ... NTAP was the biggest percentage gainer in the Nasdaq today. The daily chart shows the tech stock gapping to a 52-week high in heavy trading. The monthly chart shows the stock moving up toward its late 2001 high near 28.
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JUNIPER NETWORKS HIT 52-WEEK HIGH... Another Nasdaq leader was Juniper Networks, which broke out to a new 52-week high on rising volume. Its weekly chart shows the Nasdaq leader rising above the 15 level for the first time in eighteen months.
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HEWLETT PACKARD FALLS -- DOW STILL IN UPTREND... On the big board, Hewlett-Packard was the big story. Unfortunately, it wasn't a good one. The stock plunged over 2 points on very heavy volume. That took a toll on the Dow, which lost 31 points. The final chart shows, however, very little damage done to the Dow itself. Today's pullback came on lighter volume. In addition, big board advancers led decliners by a 17 to 15 margin. Short-term momentum still appears to be the upside.
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