BIG TECHS WEIGH ON OVERBOUGHT MARKET -- BOUNCING DOLLAR HURTS GOLD AND GOLD STOCKS
APPLE AND INTEL BACK OFF FROM RECENT HIGHS... Yesterday afternoon we showed a chart of Intel backing off from resistance along its November/December highs as it headed into an important earnings reports. The report was good, but the stock is still selling off. The same thing is happening with Apple Computer and Yahoo. All three stocks are being sold on strong earnings. That's usually a warning of an overbought market that has already discounted the likelihood of good news. Chart 1 shows Intel dipping toward its 50-day moving average. It's also the most actively-traded stock in the market. Because of its size, more selling in Intel could have a depressing effect on the tech sector and the rest of the market. Chart 2 shows Apple gapping lower today after failing a test of its recent high. Its 14-day RSI line is turning down from overbought territory over 70. Yahoo is gapping lower after recently reaching a 52-week high. Its RSI line is also turning down from overbought territory.
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THE NASDAQ IS STILL TESTING 2100 LEVEL... The Nasdaq Composite continues to test its early 2002 peak near 2100. That represents an important test for that market. The daily chart shows the Nasdaq stalled at the 2100 barrier. The daily RSI is moving down from overbought territory above 70 which is often a sign of a short-term top. The daily MACD lines are still positive, but are weakening (which means they're converging). The Nasdaq is still pretty far above its 20-day moving average, which sits near 2030. The direction of the Nasdaq at the 2100 level could determine the short-term direction of the entire market. Chart 5 plots the daily Dow bars. The Dow bounced off its 20-day average earlier in the week. It's RSI line is falling, however, and its MACD lines have turned negative. Any break of Tuesday's reaction low would be a negative sign.
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GOLD TUMBLES $8 -- SUPPORT NEAR $400... Yesterday I talked about selling in gold shares. Today that's spilling over into the commodity. Gold is down over $8.00 today owing to a bouncing dollar. The dollar rallied yesterday from an oversold condition on news of a smaller trade deficit. It's up again today. Since the dollar trends in the opposite direction of gold, gold is correcting downward. That shouldn't be too surprising. The daily RSI line for gold has been in overbought territory. Chart 7 shows the weekly line also over 70 and starting to dip. That's a sign of market ripe for a correction. The daily chart shows the 50-day moving average for gold at $405. The Bollinger bands on the weekly chart show support around $400. I suspect there's a lot of support around that $400 level.
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GOLD STOCKS ARE DROPPING... I plotted the downturn in the XAU Index yesterday. Today we're showing the AMEX Gold Bugs Index. Both indexes of gold stocks are breaking support at their December lows. Once again, two of the weakest stocks in the S&P 500 are Newmont Mining and Freeport McMoran Copper & Gold. Chart 9 puts the current selling in better perspective. The long-term uptrend is still intact. But the weekly indicators have turned negative. While gold and silver are the two weakest commodities today, natural gas and heating oil are benefitting from frigid northeast temperature. Crude oil has risen over $35. That's giving a boost to energy shares. Financial shares are also strong today.
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