DOLLAR JUMP PUSHES GOLD DOWN $8 --- CRUDE OIL GAINS A DOLLAR -- GILLETTE BREAKOUT -- SMALL CAPS HOLD 50-DAY LINE
EURO BREAKS 50-DAY LINE... The U.S. dollar, which has been stabilizing since the start of the new year, had another big gain today. Last week most of the dollar's gains came against the yen. This week the dollar is also gaining more ground on the Euro. Chart 1 shows the Euro forming a potential "double top" on its chart during January and February. Today's selling pushed the European currency to the lowest level in a month and broke its 50-day moving average by the most decisive margin since last November. The next important test will come along the January lows near 123.50. Right now all we can say is that the short-term trend of the Euro has changed from up to sideways. Any close beneath the January low would shift the trend to down. Obviously, any bearish signs in the Euro translate into bullish signs for the dollar. Dollar strength and Euro weakness contributed to an $8.00 drop in gold and pushed it back beneath $400. Gold stocks dropped as a result. The next support level for gold is near $390 with its 200-day average at $380. As is usually the case, the trend of gold is tied to trends in the currency markets.
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CRUDE JUMPS $1.00... The government reported a drop in oil inventories this morning, which pushed nearby crude oil futures prices over a dollar higher and a new recovery high for the commodity. As has been the case for the past couple of months, rising energy prices have lit a fuse under the energy sector. Chart 4 shows the AMEX Energy Select Sector SPDR hitting a new 52-week high today. The energy sector has shown new market leadership since December.
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GILLETTE NICKS MAJOR RESISTANCE... My midday update featured new 52-week highs in a couple of consumer staple leaders -- Gillette and Kellogg. Both are also trading at multi-year highs. In case you didn't see it earlier, here's another look at Gillette. The monthly bars show the stock having recently broken above a four-year basing pattern. Kimberly Clark also hit another 52-week high today.
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MID AND SMALL CAPS HOLD 50-DAY LINES... The last three charts compare the performance of the S&P 500 Large Cap, MidCap, and Small Cap Indexes. The Large Cap Index has suffered very little damage so far. It's stayed well above its early February low and its 50-day average. That's because large caps have fared better than smaller stocks over the last month. Even though the Mid and Small Cap Indexes have been weaker, they've both held at their 50-day moving averages. Today was the second day in a row that small caps actually outperformed large caps. The Nasdaq also stayed above psychological chart support at 2000. Volume, however, was light. We're not inclined to reach too much into today's market bounce, but at least some important chart supports are holding.
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BLOOMBERG TOMORROW MORNING -- NBR FRIDAY NIGHT... I'm scheduled to do an interview on Bloomberg TV tomorrow (Thursday) morning at 10:40 am (NYT). Those of you with access to a Bloomberg terminal may want to watch my half hour seminar at 11:00 am on the current state of the market. I'll also be appearing on the Nightly Business Report on Friday evening at 6:30 pm.
