ENERGY SELLING BOOSTS MARKET -- INTEL AND CITIGROUP LEAD DOW -- ETF LEADERS INCLUDE JAPAN, RETAILERS, AND REGIONAL BANKS

OIL BACK BELOW $60 AS ENERGY STOCKS FALL ... The price of crude oil fell $1.11 today to close back below the $60 level. Chart 1 shows, however, that crude is nearing its 200-day moving average at 57.39. It remains to be seen if that long-term support line will hold. In the meantime, traders are selling energy stocks which have become one of the market's weakest groups over the last couple of months. Chart 2 shows the Energy SPDR (XLE) falling back from its 50-day moving average. Downside volume has also picked up over the last couple of days as prices have fallen. Exxon Mobil was the biggest loser in the Dow today. Chart 3 shows the big oil stock still trading under its 200-day moving average. Weakness in the energy patch is contributing to optimism in the rest of the market. Upside leadership continues to come from fuel-sensitive groups like banks, retailers, and the transports. New buying in semiconductors is feeding new leadership in the technology sector.

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DOW IS BACK ABOVE 200-DAY LINE ... The Dow Industrials cleared their 200-day moving average late last week and gained more ground today. The next major resistance barrier is the early September peak at 10701. The 9-day RSI line is moving closer to a short-term overbought condition. The MACD lines, however, remain positive. Two of today's top Dow gainers were in the banking and semiconductor areas. Chart 5 shows the recent upturn in Intel which is lending support to the Semiconductor Index which has just climbed back over its 200-day line. The 9-day RSI line has cleared 50 and the 12-day Rate of Change (ROC) line has climbed over zero. Both signal a possible bottom in the making. Volume, however, hasn't been that impressive. Intel cleared its 50-day line but is still below the 200-day. Citigroup is reflective of new interest in banks. Chart 6 shows the Dow leader climbing to a four-month high on strong volume.

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ETF LEADERS ... Three of the day's top ETF gainers are shown below. Japan iShares are close to a new recovery high (Chart 7). Japan remains the strongest of the foreign markets. Retail Holders are trading at a two-month high (Chart 8). That's a direct result of falling oil prices. Chart 9 shows Regional Bank Holders nearing a test of their summer highs. I suspect that's also coming from falling oil prices along with the recent upturn in bond yields which has steepened the yield curve. These sector rotations (as well as strength in foreign stocks) are consistent with a fourth quarter market rally.

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