CRUDE OIL EXCEEDS $44 WHICH HELPS ENERGY BUT HURTS REST OF THE MARKET -- TELECOM AND UTILITIES CONTINUE TO RISE

CRUDE OIL MOVES OVER $44 -- ENERGY EXCELS... It's the same story all over again. Crude oil prices moved over $44 today to reach a new record high. While that hurt the stock market, it gave another boost to energy shares. Chart 1 shows the Energy Select Sector SPDR (XLE) breaking out to a new 52-week high on rising volume. Its relative strength line is hitting a new high as well.

Chart 1

UTILITY ETF REACHES FOUR-MONTH HIGH ... Utility stocks continue to buck the trend of the rest of the market -- possibly for defensive reasons. The utilities may also be benefitting from the recent drop in long-term rates (more on that later). Chart 2 shows the Utilities Select Sector SPDR (XLU) moving over its July peak to the highest level since early April. Its relative strength line is also hitting a new recovery high.

Chart 2

TELECOM ETF HOLDS UP ... Telecom stocks have been attracting new attention of late. Chart 3 shows the Telecom Holders (TTH) hitting a new recovery high today. I suggested last week that the group was overbought on a short-term basis and may need some backing and filling. That may still be the case. However, the recent upside breakout and a strong relative strength line make this an attractive area for further investigation.

Chart 3

DROP IN BOND YIELDS HELPS GOLD AND REITS... I mentioned in paragraph 2 that the utilities might be benefitting from the recent drop in long-term rates. Two other rate-sensitive groups that are benefitting are gold stocks and REITS. Chart 4 shows that the Ten Year Treasury Note yield continues to move down toward its 200-day moving average. That's usually a hint that the market is turning a bit more pessimistic on the economy. That's causing some selling of stocks and buying of bonds. It's also weakening the dollar, which pushed gold up another $2 today. The Gold Index (XAU) is trading back over its 50-day average. Chart 6 shows that REITs are also holding up pretty well in the face of falling rates.

Chart 4

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SOX PULLS NASDAQ LOWER... The Semiconductor (SOX) Index fell over 3% today and continued to weigh on the technology sector. The relative strength line for the SOX shows continuing underperformance versus the S&P 500. That also keeping the Nasdaq market in a relatively weak position. Chart 8 shows that the Nasdaq has been unable to climb over its 20-day moving average. The Nasdaq/S&P 500 ratio may be about to reach a new low. That could undermine the rally in the S&P 500 itself.

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S&P 500 BACKS OFF FROM 200-DAY AVERAGE... A lot was made recently about the S&P 500 falling below its 200-day moving average. Chart 9 shows the S&P backing off from its first test of the red resistance line. This is an important test. In an uptrend, the 200-day average is a long-term support line. Once it's broken, it can start to function as a resistance barrier on future rally attempts. I recently suggested that a minimum requirement for any meaningful rally was a move above both moving average lines. So far, the S&P hasn't risen above either one.

Chart 9