FCX NEARS RECORD HIGH -- ALCOA APPEARS TO BE BREAKING OUT -- MATERIALS SPDR NEARS RECORD HIGH ON RISING COMMODITIES-- COMMODITY ETF HITS NEW RECORD WHILE OVERSOLD GOLD IS BOUNCING -- RETAILERS ARE ROLLING OVER

MATERIALS SPDR NEARS RECORD HIGH ... Thanks to the ongoing bull market in commodities, material stocks remain in a leadership role. Today's 1.6% gain has made materials the day's strongest market sector. Chart 1 shows the Materials Sector SPDR (XLB) having recently broken above a neckline drawn over its October, December, February highs. After retesting it last week, the XLB is nearing a test of its recent high. There's no secret why this is happening and it's all tied to rising commodity prices. The rising relative strength ratio on top of Chart 1 shows that materials have been a market outperformer since last summer. Energy is the only market sector to do better.

Chart 1

FREEPORT MCMORAN NEARS RECORD HIGH ... Speaking of necklines, I showed a chart of Freeport McMoran Copper & Gold a few weeks back as it moved above a neckline drawn over its December /February highs. I suggested that bullish breakout would remain intact as long as the price remained above the neckline. Last week's pullback did just that (see arrow). Today's 2.7% gain puts the stock right up against its fourth quarter highs. Technical odds favor a new high. It's relative strength ratio (top of chart) has already exceeded those highs.

Chart 2

ALCOA BREAKING OUT ... While FCX broke out a month ago, Alcoa appears on the verge of doing so. Chart 4 shows Alcoa trying to break through the 40 level which contained price rallies last autumn and this spring. A decisive close over 40 (which appears likely) would complete that bullish breakout. The aluminum stock's relative strength ratio (bottom of chart) turned up during January and is still rising.

Chart 3

BOND YIELDS PULLBACK ... Yesterday's heavy selling of stocks pushed some money into bond prices which rose as a result. When bond prices rise, bond yields fall. Chart 4 shows the 10-Year Treasury Note backing off from chart resistance at its February peak (see arrows). This is a logical chart spot for that to happen. If that lower trend trend continues, that could cause a ripple effect in other markets. Lower bond yields usually coincide with lower stock prices. Lower bond yields also undermine the dollar's recent rally. Lower bond yields and a weaker dollar would give commodities another boost and gold in particular.

Chart 4

COMMODITY ETF HITS NEW HIGH AS OVERSOLD GOLD BOUNCES ... One sign that the dollar may start to weaken is today's new record high by the DB Commodities Tracking Fund (DBC) shown in Chart 5. Meanwhile, gold is starting to show signs that its recent downside correction is ending. Chart 6 shows the streetTracks Gold Trust Shares (GLD) turning up from an oversold condition near its 200-day moving average. The Commodity Channel (CCI) Index on the top of Chart 6 has formed a double bottom from oversold territory. And the daily MACD lines (bottom of chart) appear to be on the verge of turning positive for the first time in two months. Rising gold would be consistent with lower rates, a lower dollar, and lower stock prices.

Chart 5

Chart 6

RETAILERS ARE ROLLING OVER ... It's not a good sign for the stock market when financials, homebuilders, and retailers remain its weakest parts. That was the case yesterday and again today. Chart 7 shows the S&P Retail SPDR (XRT) falling more than 1% today on rising volume. It recently failed a challange of its first quarter highs. Its relative strength ratio (bottom of chart) is starting to rollover as well. The combination of falling home prices and record commodity highs continues to weigh on retail spending. That's bad news for the stock market and the economy. Dillards is the biggest retail percentage loser today. Chart 8 shows the stock falling nearly 6% on rising volume. Not a good sign.

Chart 7

Chart 8