OPEC TO CUT PRODUCTION -- OIL SERVICE STOCKS ARE STRONG -- NOBLE DRILLING, TRANSOCEAN, AND SCHLUMBERGER BREAKOUTS

OIL SERVICE INDEX IS CLIMBING... OPEC announced today it's plan to cut oil production by one million barrels a day starting April 1. The cut came as somewhat of a surprise and is boosting prices today. Crude oil futures prices are up 60 cents to 33.43. Interestingly, the OPEC ministers have cited the weak dollar as one of their incentives to keeping the price of oil at its current relatively high level. Naturally, that's giving a boost to the energy sector, which is this week's top performing group. Within the energy patch, oil serice stocks remain the strongest group. Chart 1 shows the Oil Service Index (OSX) moving up toward its recent high. The rising relative strength line along the bottom shows that the OSX has been outperforming the S&P 500 since late November. The weekly bars in Chart 2 show the OSX having broken the resistance line in a triangular shaped pattern going back to the spring of 2002. The Oil Service Index is also on the verge of exceeding the highs of last spring. The weekly RS line is rising for the first time in a year.

Chart 1

Chart 2

NOBLE DRILLING BREAKS OUT... Noble Drilling is today's top percentage gainer in a strong oil service group. Its weekly chart shows the stock climbing to 40 for the first time in twenty months. The next target is the spring 2002 peak near 46. Its RS is starting to climb versus the OSX Index. That shows leadership within the group. Two other oil service leaders are Transocean (RIG) and Schlumberger. RIG has just broken out to a twenty month high as well. Notice that its relative strength line is also outperforming the group. Schlumberger, which is viewed as the group bellwether, is even stronger. Chart 5 shows SLB climbing over ts early 2002 peak near 61. The SLB/OSX ratio has been rising since last April. Now that's leadership.

Chart 3

Chart 4

Chart 5

DOLLAR FALLS AGAIN... Adding to today's rise in energy prices is another selloff in the dollar. The dollar is falling especially hard against the Euro. The commodity-based Australian dollar has risen to the highest level since 1997. That's also giving a boost to gold prices which are up today. MORE ON THE DOLLAR LATER.