TELECOM ETF RESUMES NEW UPTREND -- MERRILL BREAKS OUT -- FALLING DOLLAR BOOSTS GOLD AND OIL SHARES -- MARKET BOUNCES ON LIGHT VOLUME
TELECOM ETF RESUMING UPTREND... Cingular's purchase of AT&T Wireless lit a fire under the telecom sector today. Most of the wireless stocks in the group gained ground including AT&T Wireless, Sprint PCS, Nextel, Verizon, and Vodafone. The only two losers were Bellsouth and SBC. Back on January 8, we showed the AMEX Telecom iShares breaking out to an eighteen-month high. I pointed out that the telecom sector was one of last year's weakest groups and was starting to show good relative strength in the new year. It was also suggested that buying the Telecom iShares was a simple way to participate in the emerging telecom uptrend. Chart 1 shows the upside breakout pointed out in early January. After consolidating above the breakout point, the telecom ETF hit a new closing high today. The rising relative strength line along the bottom shows new telecom leadership during the past two months.
Chart 1
MERRILL LYNCH BREAKS OUT... Brokerage stocks continued the rally that started last week. The next chart shows Merrill Lynch breaking out to a new 52-week high on rising volume. The monthly chart shows the broker bellwether having just broken through chart resistance near 58. The AMEX Broker/Dealer index hit a new 52-week high today.
Chart 2
Chart 3
FALLING DOLLAR BOOSTS GOLD AND OIL STOCKS... The dollar fell against the Euro today. As a result, the CRB Index gained 2.20 points led by copper and precious metals. Gold jumped $5.00 to $415 which is the highest close in a month. Crude oil rose .63 cents to close over $35 for the first time in months. Gold stocks rose over 3% today. The AMEX Gold Bugs Index and the XAU have both climbed back over their 50-day moving averages. Short-term indicators have turned positive. Oil stocks were up. The Oil Service Index hit another 52-week high. The AMEX Oil Index is on the verge of doing the same. The rising relative strength line shows oil stocks outperforming the S&P 500 since early December.
Chart 4
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SPDRS AND QQQ ADVANCE ON LIGHT VOLUME... Charts 6 and 7 show the S&P 500 and Nasdaq 100 ETFs rising today. The volume, however, was disturbingly light. The SPY is again testing the top of its recent trading range while the QQQ is still well off its high. The QQQ/SPY ratio line shows Nasdaq underperformance for the last five weeks. Today at least the Nasdaq showed better performance. Most of that, however, came from the telecom sector. The good news is that the QQQ has stayed over its 50-day average.
Chart 6
Chart 7
