OIL FALLS EVEN FURTHER -- GOLD STOCKS ARE TURNING DOWN -- BIOTECHS AND DRUGS BOOST HEALTHCARE -- ASIAN ETFS ARE BOUNCING -- CANADA IS CORRECTING WITH COMMODITIES

ENERGY CONTINUES TO CORRECT ... With crude oil falling another dollar today, energy stocks remain on the defensive. The weakest part of the energy sector -- oil service -- is falling the hardest. Chart 1 shows the Oil Service Holders (OIH) breaking their 50-day average. A further drop to the early November low now appears likely. Chart 2 shows the Energy Select Sector SPDR (XLE) in danger of slipping under its 50-day line as well. Both energy ETFs are falling on heavy volume. Their relative strength lines have also put in short-term tops. What's bad for energy is usually good for the rest of the market. Airlines continue to take off in a continuation of yesterday's strong gains. Most stocks related to commodities are also experiencing profit-taking. A bounce in the dollar is causing more selling of gold stocks which are showing even more weakness.

Chart 1

Chart 2

OVERBOUGHT EURO TURNS DOWN -- NEWMONT BREAKS 50-DAY LINE -- FCX SELLING OFF... An oversold dollar is bouncing today. The most prominent move is coming against the Euro which has felt the biggest impact of the dollar's decline. Chart 3 shows the Euro falling today from an overbought condition (its RSI line is over 70). As a result, gold bullion is down $3.00. Gold stocks, which turned down first, continue to deteriorate. Newmont Mining (the biggest stock in the XAU Index) is breaking its 50-day average today (Chart 4). The big gold stock has been falling on rising volume since last week. Another XAU loser is Freeport McMoran Copper & Gold. Chart 5 shows FCX falling under its 50-day line as well. FCX is being hurt by a downturn in both copper and gold. As I've suggested before, the downturn in gold stocks usually warns of a pullback in gold and a rebound in the dollar. That may also be partly responsible for the decline in crude oil and energy stocks this week.

Chart 3

Chart 4

Chart 5

HEALTHCARE IS GETTING BETTER... The healthcare sector is quietly moving up in the relative strength rankings. It's trend improvement can be seen in Health Care Select Sector SPDR plotted in Chart 6. The XLV has risen to the highest level in two months and is nearing a test of its 200-day moving average. Its relative strength line under the chart has risen back over its 20-day average for the first time in three months. Two of the reasons for its new strength can be seen in the two charts just below it. Biotechs are one of today's strongest groups. Chart 7 shows the Biotech Holders (BBH) hitting a new two-month today as well. Their relative strength line is also starting to turn up. The weakest healthcare group has been the drugs. Even they're starting to show new signs of strength. Chart 8 shows the Pharm Holders (PPH) moving over their 50-day moving average today. If you're looking for an undervalued and somewhat overlooked place to put some money at this point, healthcare may be a good place to look.

Chart 6

Chart 7

Chart 8

ASIAN ETFs GAIN GROUND ON RISING SOX AND FALLING OIL ... Two of the day's strongest global ETFs are Taiwan and Japan. Chart 9 shows the Taiwan iShares (EWT) bouncing off moving average support after experiencing a minor pullback over the last week. I recently pointed out the close correlation between Taiwan and the Semiconductor (SOX) Index. With the SOX moving over its 200-day line, however, the Taiwan ETF is starting to rise again as well. I recently showed the emerging uptrend in the Japan iShares (EWJ) and attributed it to a rising yen and falling oil prices. [Japan is totally dependent on imported oil and, as a result, has been one of the year's worst global performers]. Notice the heavy volume on yesterday's upside bounce in the EWJ (as crude fell 7%). Japan should be one of the main beneficiaries of weaker crude.

Chart 9

Chart 10

CANADIAN ETF AND CURRENCY STARTING TO DIP... I've written about the fact that Canada has gotten a huge boost from rising commodity prices since it's a big producer of raw materials. It stands to reason then that any weakness in commodities would have a negative impact on that market. Chart 11 shows Canada iShares (EWC) starting to correct from an overbought condition. Notice that its RSI line is starting to slip under 70. That's even more evident in the Canadian Dollar (Chart 12). The RSI line has already turned down in the $CDW and its daily MACD lines are negative. Any downturn in the Canadian Dollar would coincide with a bounce in the dollar. That would contribute to more profit-taking in commodities and global markets tied to those commodities -- like Canada.

Chart 11

Chart 12