ALCOA LEADS DOW TO NEW RECORD -- BARRICK GOLD HELPS XAU INDEX BREAK OUT -- CISCO AND INTEL LEAD TECHS HIGHER -- SEMICONDUCTOR HOLDERS ACHIEVE BULLISH BREAKOUT
ALCOA BREAKS OUT TO A NEW RECORD ... Not only did the Dow Industrials hit a new record today, it was the biggest percentage gainer of the major market indexes. A big reason for that was a 6% gain in Alcoa. The monthly bars in Chart 2 show the aluminum giant breaking through its 2001 highs to set a new record. Alcoa also helped make basic materials the day's strongest sector in a rising market. While part of Alcoa's gain is based on its failed attempt to buy Alcan Aluminum (and new rumors that AA itself may be a takeover target), another part is simply the fact that metal prices are rising and metal stocks along with them.
Chart 1
XAU INDEX BREAKS OUT ... With the U.S. Dollar falling to another record low against the Euro, gold prices rose another $6.00 today. That helped make the 3% gain the Gold & Silver (XAU) Index one of the day's strongest. More importantly, Chart 2 shows the XAU trading over 150 for the first time in nearly a year. The other main gold index I follow -- the Gold Bugs (HUI) Index -- has yet to match the XAU breakout. Part of the reason for that discrepancy might be attributed to one stock -- Barrick Gold. Chart 3 shows ABX rising above its May high. In addition, the stock has broken a resistance line extending back to last spring. Why that's important is that Barrick is the heaviest weighted stock in the XAU (21%). At the same time, it's not even included in the HUI.
Chart 2
Chart 3
CISCO BREAKS OUT... On June 29, I showed bullish long-term charts for four of the biggest technology stocks that were leading the Nasdaq market higher. They were Cisco, Dell, Intel, and Oracle. All four are at or near new 52-week highs. The two I'm most interested in today are Cisco and Intel. Let's take them in that order. The daily bars in Chart 4 show Cisco surging nearly 4% today on heavy volume and breaking through its January high. Its relative strength ratio has been rising since late May. It gets even better. The monthly bars in Chart 5 show the networking giant breaking through its early 2004 intra-day peak at 29.39. That puts the big Nasdaq leader at the highest level in six years. Its monthly relative strength line has been rising for the last year. That's helping make Network iShares (IGN) the day's strongest group ETF. Semiconductor Holders are in second place.
Chart 4
Chart 5
SEMICONDUCTOR HOLDERS HIT THREE-YEAR HIGH... We've been writing a lot of bullish comments lately on the reviving semiconductor group. And for good reason. Chip stocks continue to show good absolute and relative strength. The weekly bars in Chart 6 show the Semiconductor Holders (SMH) trading over 40 for the first time in three years. Its relative strength ratio, which bottomed early this year, is now trading at a new 52-week high. A lot of that strength in coming from Intel. Today's 5% gain in Intel makes it one of the day's leaders in the Dow, the Nasdaq, and the S&P 500. I've shown Chart 7 a couple of times before, but it's worth showing again. Intel has risen to an eighteen-month high and broken a 2 1/2 year resistance line. Its relative strength line has done the same. Intel is often viewed as a bellwether for the chip group. Its strong upside action is good news for both. But there are other upside breakouts taking place in the chip group.
Chart 6
Chart 7
OTHER SMH LEADERS ... Intel isn't the only big chip stock that's breaking out. Applied Materials is challenging its early 2006 peak (Chart 8). KLA Tencor has already exceeded that chart barrier (Chart 9). So has Texas Instruments. The weekly bars in Chart 10 shows TXN breaking out to a new six-year high and completing a bullish "ascending triangle" in the process. Hardly a day goes by when I don't get a message from a reader stating that he or she isn't interest in semiconductor stocks. All I can say in response is that you should be. Gold stocks too.
Chart 8
Chart 9
Chart 10
DOW AND S&P 500 BREAK OUT ... The market finally broke out of its six-week trading range to the upside. And it did so pretty convincingly. The hourly bars in Charts 11 and 12 show the Dow Industrials and the S&P 500 gaining 2% and 1.9% respectively to reach new highs. Although not shown here, today's price rise also came on rising volume which is a healthy combination. Every market sector gained ground. A good day all around.
Chart 11
Chart 12
