COMMODITIES ARE RISING AGAIN - CRB INDEX HITS THREE-MONTH HIGH -- BASIC MATERIALS ARE CLIMBING -- GOLD STOCKS JUMP
GOLD STOCK JUMP OVER 4%... Our midday message showed gold challenging its July peak at $410. Gold closed the day at $409. With gold on the verge of a bullish breakout, the Gold & Silver Index (XAU) gained more than 4% and closed at a new four-month high. Chart 1 shows the XAU moving up to challenge its 200-day moving average. The weekly bars in Chart 2 show the XAU also challenging its down trendline drawn over the highs of the eight-month downside correction. A close over that resistance line would be another bullish development. The weekly RSI line in Chart 2 has moved over 50 (see circle), which is a sign of strength. And, the weekly MACD lines are positive (see arrow). In a generally down market, two of the strongest gainers were Newmont Mining and Freeport McMoran Copper & Gold. They also led a reviving Basic Materials group.
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NEWMONT MINING EXCEEDS 200-DAY AVERAGE... Our midday update also showed Newmont Mining breaking through its 200-day average to reach a new four-month high. Chart 2 also shows big upside volume on the price breakout. That bodes well for the gold group since NEM is the biggest stock in the XAU. The weekly bars in Chart 4 are also good for the XAU. That's because NEM has already broken its eight-month down trendline. Newmont was one of the top percentage gainers in a falling S&P 500 Index. Another metal leader was Freeport McMoran Copper & Gold. Both of those are boosting the Basic Material sector.
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MATERIALS GETTING MORE EXPENSIVE... The Materials Select Sector SPDR has held up better than the rest of the market and has started climbing again. Chart 5 shows the Materials Select Sector SPDR breaking its two-month down trendline after rising above its moving average lines. Its relative strength line is trading at a new recovery high. NEM and FCX were the two biggest percentage leaders today in the XLB. Together those two metal stocks account for 8% of the Material SPDR. This ETF is one way to play a revival in gold stocks and commodity-related stocks in general. And commodities are starting to rise again.
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CRB INDEX HITS THREE-MONTH HIGH ... Gold rose $3 while oil climbed over a dollar today. They weren't the only commodity gainers however. Fourteen of the seventeen commodities in the CRB Index gained ground today. The CRB itself climbed four points and reached the highest level since early June. A few weeks back I talked about the CRB starting to find support near its 200-day moving average. Today's upside breakout through its July peak is a bullish sign for commodities and stocks tied to those commodities.
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MARKET BOUNCE STILL LACKS VOLUME... Today's down day ended a four-day winning streak. The next three charts, however, show that the short-term bounce is still well below moving average lines in the three major stock indexes. What's more striking is the absence of heavy trading during the recent price bounce. Serious upmoves are usually accompanied by increasing volume. So far we haven't seen that. The only good news today was that the price decline came on even lighter trading volume. Despite the short-term market improvement, our longer-term indicators remain bearish.
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