TOBACCO LIGHTS UP -- HEALTHCARE GAINS -- ENERGY STOCKS CONTINUE TO SINK ON WEAK CRUDE OIL
TOBACCO STOCKS JUMP... A favorable court ruling sent tobacco stocks sharply higher and made them the day's top performers. The strongest performance was seen in RJ Reynolds. RJR surged to a new six-month high on massive volume. Altria also gapped higher on strong volume.
Chart 1
Chart 2
HEALTHCARE WINNERS... The healthcare group was also strong today. The top percentage gainer was IMS Health which rose to a new 52-week high on rising volume. Bausch & Lomb did the same. However, its weekly chart paints a more interesting story. Chart 5 shows BOL testing the high formed during the first quarter of 2002 near 44. A decisive close through that price level would consitute an impressive bullish breakout.
Chart 3
Chart 4
Chart 5
ENERGY SHARES ARE SINKING... The weakest sector of the stock market has been energy shares. Chart 6 shows the Energy Select Sector SPDR dropping down toward its 50-day moving average. More importantly, its relative strength line reveals a group that has been under-performing the S&P 500. The weakest part of the energy patch is oil service. Chart 7 shows the PHLX Oil Service (OSX) Index having already broken its 50- and 200-day moving aveage lines. The culprit is of course falling energy prices -- especially crude oil.
Chart 6
Chart 7
CRUDE OIL HEADED TO 25?... Crude oil fell again today to end near $27. The weekly chart shows that the next potential support level is at $25. That level stopped declines during April and last November. The energy sector remains the weakest part of the commodity world. Three of the weakest commodities in the CRB Index today were crude oil, heating oil, and natural gas. With energy prices under pressure, it's no wonder that the energy sector is doing to poorly. Weaker oil, however, is helping airline stocks.
Chart 8
CRB INDEX IN CORRECTION... After recently hitting a six-month high, the CRB Index has dropped back into a test of moving average support. Energy prices are a big part of the reason for the correction. Other commodities that have dropped sharply this week have been corn, cocoa, coffee. The CRB bounced 80 points today. Ten commodities closed higher today, and seven lower. However, its recent dip may be providing a little relief to the bond market. Chart 10 shows the 10-year T-note yield dropping under its 50-day average. Falling rates are having a negative impact on the Dollar Index. We recently pointed out the strong correlation between bond yields and the dollar. Right now, both are falling. The dollar's biggest drop came against the Euro. That should be good for gold,which gained ground today. Gold stocks gained 2%. [See John's Latest Performance Chart which shows energy and precious metals diverging].
Chart 9
Chart 10
Chart 11
Chart 12
BLOOMBERG TV TOMORROW MORNING... I'm scheduled to do a TV interview on Bloomberg tomorrow (Thursday) morning at 7.54 am. .
