GOOGLE HEADS TOWARD 200-DAY LINE -- NASDAQ IS NOW PULLING MARKET LOWER -- JAPAN ETF BREAKS 50-DAY LINE -- CRB INDEX CONTINUES TO WEAKEN

CRB INDEX BREAKS 50-DAY LINE ... The sharp slide in commodity markets that started last week continued into Monday trading. Today's four point loss has pushed the Reuters/Jefferies CRB Index to the lowest level for 2006. It broke its 50-day average on Friday and now appears headed toward its 200-day line. Gold, oil, and most other commodities remain on the defensive as are gold, energy, and basic material stocks. Some foreign ETFs that are tied to commodity prices are also coming under pressure. Two in particular are Canada and Japan.

Chart 1

CANADIAN MARKET IS TESTING 50-DAY LINE... The Canadian stock market is closely tied to the fortune of commodity markets. They accounted for its strong showing over the last year. Over the short run, however, they're pulling it lower. Chart 2 shows the Canada iShares (EWC) falling back to their 50-day moving average. The big red volume bar shows the unusually heavy selling that accompanied last Tuesday's big commodity selloff. The daily MACD lines have also turned negative. The Japan iShares have already broken their 50-day line.

Chart 2

EWJ BREAKS 50-DAY LINE ... Last Thursday I showed the Japan iShares testing their (blue) 50-day moving average and the lower line of what appeared to be a "symmetrical triangle" (orange lines). Unfortunately, neither one of those two support lines have held. Chart 3 shows the EWJ trading at the new low for the month and threatening its mid-January low. The relative strength ratio shows that the EWJ has started to underperform the U.S. market. Part of the reason may be tied to the continuing drop in the price of gold which fell another eleven dollars today. Although we don't normally think of Japan as being driven by commodity markets, it's been pretty closely linked to gold over the last year. Both are now on short-term sell signals.

Chart 3

GOOGLE WEIGHS ON NASDAQ MARKET ... Because of its large size, Google has a big influence on the Nasdaq market. Unfortunately, most of the recent influence has been to the downside. The next chart shows the big Internet stock tumbling $130 (-27%) since its early January peak. The stock is now nearing a test of its 200-day line. The relative strength ratio beneath the chart shows how badly Google has underperformed the Nasdaq in 2006. [Google is a good example of why the break of a 50-day average is considered to be a sell signal]. Chart 5 shows the Nasdaq Composite losing more ground today after slipping beneath its 50-day line last week. The Nasdaq/S&P relative strength line may also be sending an ominous message. After rising throughout the fourth quarter, the ratio appears to have peaked. It's now trading below its mid-January low and appears to have completed a "double top" formation. The ratio has also broken its four-month up trendline. That's normally a negative sign for the rest of the market since it means that the Nasdaq is now pulling the market lower instead of higher.

Chart 4

Chart 5