CRB INDEX DROPS ALONG WITH BASIC MATERIALS -- BETTER HEALTHCARE -- NSC LEADS TRANSPORTS -- AUTOS ARE GEARING UP

CRB INDEX BREAKS 50-DAY AVERAGE... The downside correction in commodity prices took a more serious turn today when the CRB Index fell below its 50-day moving average by the widest margin in nine months. That suggests that the recent dollar rally is causing selling across a broader selection of commodity markets. While the vast majority of commodities declined today, the biggest percentage losers were silver (-11%) and copper (-6.5%). Gold prices fell another $6 and crude oil lost 70 cents. That accounts for recent selling in the Basic Materials sector which was the day's biggest sector loser. Chart 2 shows the Materials Select Sector SPDR falling under its 50-day average today as well. This group has been moving sideways since the start of the year. Its relative strength line, however, has been dropping since the start of January. That reflects the group's loss of market leadership. Among the hardest hit stocks today are Alcoa, Freeport McMoran Copper & Gold, and Phelps Dodge.

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BASIC MATERIALS UNDER PRESSURE... The next three charts show the extent of the recent selling in commodity-related stocks. Alcoa fell to a five month low and broke its 200-day average today. Phelps Dodge fell to a four-month low. FCX is being hurt by falling gold and copper prices and has fallen to a six-month low.

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BUYING HEALTHCARE... Healthcare was the day's top sector. Chart 6 shows the Health Care Select Sector SPDR bouncing off its 50-day line. Although biotechs and drugs were up today, the biggest gainers were in the HMO group. The most impressive gainer was IMS Health which soared on heavy volume -- as shown in Chart 7.

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NORFOLK SOUTHERN LEADS TRANSPORTS HIGHER... The Dow Transports continue to hold up better than the other two Dow averages. Its daily chart shows it holding well above its 50-day moving average. I recently talked about transportation strength coming maingly from the rails and truckers. That's still the case. Today's transportation star was Norfolk Southern. Its daily chart shows the rail stock climbing to a ten-week high on very strong volume.

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AUTOS MOVE INTO SECOND GEAR... Autos have had a good week. And it's coming at a good time. That's because Ford and General Motors had been testing long-term support at their 200-day moving averages. Both have climbed back over their 50-day lines on rising volume. Ford did it today. GM did it yesterday. That's pretty good chart action.

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