OIL SERVICE STOCKS LEAD STRONG ENERGY COMPLEX -- MORE OIH LEADERS ARE BREAKING OUT -- GASOLINE IS GETTING MORE EXPENSIVE -- FINANCIALS MAKE STAND AT 200-DAY AVERAGE -- SO DOES MICROSOFT
OIL SERVICE HOLDERS SHOW NEW LEADERSHIP ... After nearly a year of underperformance, oil service stocks are starting to show new market leadership. The Oil Service Holders (OIH) are up more than 3% today and are the day's strongest ETF. [Energy is the day's strongest sector]. Chart 1 shows the OIH trading at a new high for the year and headed for a test of its December high at 150. The OSX/S&P relative strength ratio is breaking a down trendline extending back to last May (see up arrow). A couple of OSX leaders that I showed on Friday are breaking out today. Chart 2 shows National Oilwell hitting a new 52-week high and nearing a test of its all-time high at 77.60. Chart 3 shows Smith International breaking out to a new seven-month high. There are some other oil service breakouts taking place.
Chart 1
Chart 2
Chart 3
MORE OSX BREAKOUTS ... Chart 4 shows Cooper Cameron closing over 60 for the first time in its history. Its relative strength line is at a record high as well. Chart 5 shows Tidewater trading over 56 for the first time in ten months. Its relative strength ratio is breaking out as well. Chart 6 shows Schlumberger trading over 66 for the first time this year. Its relative strength line has been rising since January. Noble Drilling is up 3.3% and is one of the top percentage gainers in the S&P 500 (along with Rowan). Chart 7 shows NE having given an initial p&f buy signal at 75. A close at 77 or higher would be an even stronger buy signal.
Chart 4
Chart 5
Chart 6
Chart 7
GASOLINE LEADS ENERGY MARKETS HIGHER ... In case you're wondering where most of the strength is coming from in the commodity pits, take a look at Chart 8. That chart shows gasoline futures prices trading at the highest level in more than six months. Gasoline is up another 2% today, making it the strongest commodity in the CRB Index. That's in anticipation of the upcoming driving season which is less than three months away. The renewed strength in energy prices (and most other commodities) is partially the result of a weaker dollar (which hit a new 2007 low on Friday). Higher commodities also confirm the higher CPI and PPI numbers that we saw last week, and suggests that predications for lower inflation numbers are premature.
Chart 8
FINANCIALS AND MICROSOFT BOUNCE OFF 200-DAY LINES... On Friday, I wrote about financial stocks holding the key to the market's direction. I showed the Financials Select SPDR (XLF) testing long-term support at its 200-day moving average. Monday buying of banks and brokers is giving a boost to the XLF today which, in turn, is bouncing off its 200-day line. The stochastic lines also show the XLF in oversold territory. That's helping to stabilize the rest of the market. The Dow is also getting a boost from Microsoft which is bouncing off its 200-day line (Chart 10). The 14-day RSI is turning up from oversold territory at 30. A rebound in that big technology stock is also taking some pressure off the Nasdaq market. Although its long-term trend is still in doubt, the market appears to be stabilizing at current levels.
Chart 9
Chart 10
