CRB INDEX JUMPS ON FALLING DOLLAR -- OIL SPIKE AND SOX DROP CAUSES MARKET RALLY TO FIZZLE -- MOVING AVERAGES ARE NOW IN JEOPARDY -- UTILITIES BOUNCE
CRUDE OIL JUMPS OVER $41... Crude oil prices jumped $1.65 today to close over $41 for the first time in nearly two months. That gave a boost to energy shares. Chart 2 shows the Energy Select Sector SPDR hitting a new 52-week high today. Unfortunately, that proved bearish for the rest of the market which was trying to recover from early morning losses. A plunge in the Semiconductor (SOX) Index weighed heavily on the Nasdaq market and eventually pulled the Dow and the S&P 500 down with it. The afternoon selling also came on heavier trading which is a negative sign.
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SOX PLUNGED TO YEARLY LOW... Semiconductor stocks plunged 5% today and cast a bearish pall over the entire market. The SOX Index fell to the lowest level in ten months. Its relative strength line peaked in January and has also fallen to a new low for the year. Weakness in the SOX over the last six months has made the Nasdaq an underperformer, which is another market negative. Once again, the Nasdaq suffered bigger percentage losses than the Dow and the S&P 500. Chart 4 shows the Nasdaq Composite headed for a test of its 2004 lows. The Nasdaq/S&P 500 ratio has already broken down. Today's Nasdaq drop saw the heaviest trading in three weeks. That's a bad omen.
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DOW AND S&P THREATENING 200-DAY LINES... Charts 5 and 6 shows today's rally failure in the Dow Diamonds and the S&P 500 SPDRS. Both fell after trading higher earlier in the day. The bearish action also saw heavier trading volume. That's a bad combination. Both indexes are now threatening to break their 200-day moving averages.
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UTILITIES ACT AS SAFE HAVEN ... Earlier today I showed some defensive buying in healthcare stocks. Another defensive group that had a good day was utilities. The Utilities Select Sector SPDR gained ground today and is well above its moving average lines. Its relative strength line rose to a new three-month high. Gold stocks also gained ground today on the back of a $4.00 jump in gold and rising commodity prices.
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CRB INDEX HITS MONTHLY HIGH ... Gold and oil weren't the only commodities to rise today. The CRB Index rose 4.44 points to close at the highest level in four months. A weak retail report pushed the dollar sharply lower today which gave another boost to commodity markets. Commodity markets are once again emerging as the strongest asset class. Two beneficiaries of that are gold and energy stocks.
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