INTERNET ETF EXCEEDS 50-DAY AVERAGE LED BY EBAY AND YAHOO -- OIL BOUNCES ON EVE OF OPEC MEETING -- NEWMONT MINING BREAKS OUT -- YEN MAY BE ON VERGE OF BREAKOUT
INTERNET INDEXES SHOW NASDAQ LEADERSHIP... One of the ways to detect group leadership in an emerging uptrend is to see which groups rise above their 50-day moving averages first. Earlier today I showed the mid and small cap indexes doing just that, which puts them in a leadership role. Within the technology sector, the Internet group accomplished the same feat. Charts 1 and 2 show two popular Internet indexes closing over their 50-day averages after having broken through a two-month down trendline. Their relative strength lines (versus the Nasdaq Composite Index) have risen to new highs. On both counts, that qualifies the Internet as a potential leader in a Nasdaq market that appears to be turning higher. One of the simplest ways to participate in an upturn in the Internet group is with an Exchange Traded Fund traded on the American Stock Exchange. An ETF is a group index that trades like a stock. By buying the stock you buy the entire group.
Chart 1
Chart 2
INTERNET HOLDERS TURN UP... One of the day's strongest ETFs was the Internet Holders plotted in Chart 3. It looks just like the Internet indexes shown in the preceding charts. The Internet ETF has broken its 50-day average and its two-month down trendline. Its relative strength line has been rising throughout the month of March and is on the verge of hitting a new high. The only thing missing today was volume. Although today's volume was higher than yesterday's, it was still on the light volume. Then again, that's been true of the entire market over the past week. To see where today's Internet strength came from, we need only look at the two most heavily-weighted stocks in the HHH -- EBay and Yahoo.
Chart 3
EBAY AND YAHOO LEAD INTERNET HIGHER... These two Internet bellwethers comprise over half of weighting in the Internet Holders. EBay accounts for 33% and Yahoo 24%. Chart 4 shows eBay climbing over its 50-day average today to end within a point of a new 52-week closing high. Yahoo was even more impressive. That stock surged to a new 10-week high after exceeding its 50-day line last week. In both cases, however, volume was on the light side. Price-wise, both stocks are within striking distance of their January highs.
Chart 4
Chart 5
OIL RISES ON OPEC NEWS... With conflicting reports in advance of tomorrow's OPEC meeting, crude oil jumped 75 cents today to close over $36 (Chart 6). That keeps crude over its 50-day average and above chart support along its January high near $35. That caused new buying in energy shares, which were the day's top sector. Chart 7 shows the AMEX Energy Select Sector SPDR bouncing today -- although on light volume. Its daily MACD lines are still negative. The drop in its relative strength line last week was, in my opinion, one of the factors supporting new buying in the stock market. Any serious upmove from here in crude prices -- or energy shares -- could undermine market confidence. We'll probably know more about the direction of oil by tomorrow's close.
Chart 6
Chart 7
NEWMONT MINING LEADS GOLD RALLY... Gold prices climbed back over $420 today. [The CRB Index gained 4.12 points]. That gave a big boost to gold shares which appear to be resuming their major uptrend. The XAU Index is challenging its February high at 105. Chart 10 shows that the biggest stock in the XAU Index -- Newmont Mining -- has already cleared that resistance barrier. That bodes well for the entire gold group. As does the chance for a weaker dollar.
Chart 8
Chart 9
Chart 10
JAPANESE MAY BE DONE BUYING DOLLARS... Although it closed modestly lower today, the monthly bars in the next chart show that the Japanese yen is on the verge of hitting a new three-year high against the dollar. A report in the London Times suggests that the Japanese policy of buying dollars to keep the yen from rising may be ending. If that's true, a higher yen will only serve to weaken the dollar. I suggested last week that a rising yen was one of the driving forces behind the recent upturn in gold. While a higher yen would be bad for the dollar and good for gold, it could be bad for bonds. The Japanese are the biggest foreign buyers of U.S. Treasuries with dollars bought to keep the yen from rising. An end to dollar buying could also mean an end to Treasury buying. That may explain the recent uptick in U.S. bond yields. Japanese bond yields are also starting to rise again, which is another hint that global rates are starting to move higher.
Chart 11
