UTILITIES LOSE SAVE HAVEN STATUS -- DOW COMPOSITE INDEX BREAKS 200-DAY LINE

UTILITY PLUNGE ENDS SAFE HAVEN STATUS ... With the market apparently starting another downleg, even the safe haven status of utilities appears to have ended. Chart 1 shows why. The Dow Utilities plunged over 13 points earlier today to shatter their 50-day moving average. That puts all three Dow averages in downtrends. Chart 2 shows the Dow Transports falling back below their 200-day moving average and threatening their April low. The recent plunge in the transports was an earlier sign of economic softening since most of the new selling took place in the economically-sensitive rails and truckers. Earlier today, I showed the Dow Industrials unable to climb back over their 200-day line. Today's utility plunge had a negative impact on the Dow Jones Composite Index.

Chart 1

Chart 2

DOW JONES COMPOSITE INDEX BREAKS 200-DAY LINE... The DJ Composite Average is made of all 65 stocks in the Dow Industrials (30), Transports (20), and Utilities (15). Chart 3 shows the DJA bouncing off its 200-day line in late April. Not today. The DJA is closing under that long-term support line for the first time since last August. With all three Dow Averages falling, there isn't anything left to hold the DJA up. Since much of the utility pricing is based on natural gas prices, it's likely that today's utility plunge is tied more to falling energy prices than the threat of higher interest rates. Falling stock prices continue to push money into bonds. As a result, long-term rates are still falling.

Chart 3

PROFUNDS OFFERS RISING DOLLAR FUND ... I'm often asked if there are any ways for investors to take advantage of trends in the dollar. There are now. ProFunds offers two new funds that track the direction of the U.S. Dollar Index. After this week's upturn in the USD, the Rising U.S. Dollar ProFund would be the more appropriate. They also offer eight inverse bear funds for those wishing to hedge against a falling stock market. Bear market funds gain in value when the market falls. Bear market funds, however, are not meant as long-term core holdings. They should be viewed as shorter-term trading vehicles. Profunds offers several Ultra funds that double the performance of the benchmark on which they're based (either on the long or the short side). More conservative investors might want to stick with the more traditional funds that match a market benchmark. Since I'm asked these questions so often, I encourage you to visit their website (www.Profunds.com) and read up on the many trading alternatives they offer. Another advantage of ProFunds is that it allows easy switching among the various funds and doesn't exact penalties for frequent trading.