OIL SERVICE STOCKS LEAD STRONG ENERGY SECTOR -- ANARDARKO AND TRANSOCEAN BREAKOUTS -- TELECOM ETF STILL CLIMBING -- 3M TOOKS TOPPY -- SUNW NEAR BREAKOUT -- FALLING DOLLAR BOOSTS GOLD
CRUDE OIL CLIMBS OVER $36... Crude oil prices jumped another $1.13 today to close above $36. Natural gas and heating oil prices gained 5% and 3% respectively. That gave a another big boost to the energy sector, which was the day's top performer. While the entire group had a strong day, the biggest gains were seen in the Oil Service Index which jumped more than 4%. Chart 1 shows the PHLX Oil Service Index (OSX) climbing to the highest level in seven months. Just a month ago, the OSX broke out of a basing basing pattern. Since then, it has successfully retested the breakout point and resumed its uptrend. I also suggested a month ago that while natural gas stocks were the strongest part of the energy patch, oil service stocks were the cheapest and provided the best value. That's still the case.
Chart 1
ENERGY LEADERS... Two of the top percentage energy gainers are shown below. Both also have attractive chart patterns. In the oil service group, Transocean appears to be breaking out of an eighteen-month basing pattern. Although not in the oil service index, Anadarko recently broke through major resistance at 50 and then successfully retested that level. That's a bullish look chart pattern.
Chart 2
Chart 3
TELECOM ETF HITS NEW RECOVERY HIGH... Telecom is one of the market laggards of 2003 that's showing new signs of life early in the new year. We recently showed the Telecom iShares breaking through major chart resistance and reaching the highest level since 2002. Continued buying of telecom shares pushed the Exchange Traded Fund (ETF) to a new recovery high today. The relative strength line along the bottom of the chart is also climbing. I continue to like the telecom sector.
Chart 4
3M HURTS INDUSTRIALS... Industrial stocks experienced selling today. 3M had a lot to do with that. The daily chart shows a downside reversal on heavy volume. That's not a good sign. Daily indicators have been weakening. The RSI line has fallen under 50; the daily MACD lines are negative; and the relative strength has been falling versus the S&P 500 since mid-December. Of more concern is the overbought nature of the monthly chart.
Chart 5
3M MONTHLY CHART IS OVERBOUGHT... The monthly bars in Chart 6 show 3M rising strongly over the past year. The problem is that the 14-month RSI line has moved into overbought territory over 70. An overbought reading on daily and weekly charts isn't as serious as an overbought reading on the monthly chart. I take that as a strong caution sign. The relative strength line along the bottom has been rising versus the S&P 500 since 2000. The RS line, however, appears to be "double topping". This looks to me like a stock that's ripe for some serious profit-taking.
Chart 6
DOW DROPS 71 POINTS WHILE NASDAQ GAINS 7 -- SUNW NEAR BREAKOUT... Last week I talked about the reappearance of Nasdaq leadership. That was seen again today when the Nasdaq gained ground while the Dow lost some. Small cap stock averages also reached new highs. That's usually a good sign when small caps and techs are leading. 3M was the main drag on the Dow. The top percentage gainer in the Nasdaq was JDS Uniphase which climbed to another 52-week high. Another Nasdaq leader that may be on the verge of a bullish breakout is Sun Microsystems. The weekly chart for SUNW shows the stock challenging the highs of last June. The big green volume bars for the past two weeks reflect strong upside volume. The rising relative strength line also shows that SUNW is starting to show leadership in the Nasdaq market.
Chart 7
DOLLAR DROP BOOSTS GOLD... The dollar suffered its biggest drop against the Euro in two months. That gave a $5.80 boost to gold and 4% to gold stocks. The falling dollar also gave a boost to the CRB Index. Thirteen of the seventeen commodities gained ground -- led by the energy markets. Today's gold bounce kept it above its 50-day moving average and psychological support near $400.
Chart 8
