BIG JUMP IN UNEMPLOYMENT RATE SINKS MARKET -- DROP IN DOLLAR GIVES BIG BOOST TO COMMODITIES AS GOLD AND OIL SURGE -- BIGGEST STOCK LOSERS ARE AIRLINES, FINANCIALS, AND HOMEBUILDERS

EURO SURGES AGAINST THE DOLLAR ... The Euro surged against the dollar yesterday on expectations for a European rate hike next month. The dollar is falling today because of the biggest jump in the U.S. unemployment rate in more than two decades (from 5% to 5.5%). Chart 1 shows the Euro jumping another percentage point today and back over its 50-day moving average. That's continuing the rally in commodities that started yesterday. Crude oil is up another $4 (Chart 2) and gold is up nearly $20 (Chart 3). The CRB Index is up more than 8 points. Commodity-related stocks are the only ones in the black today. The combination of the weak employment number and surging oil prices is putting the rest of the stock market under heavy selling pressure.

Chart 1

Chart 2

Chart 3

BANKS AND HOMEBUILDERS ARE BIG LOSERS ... While most stock groups are in the red today, two of the biggest losers are Bank Regional Holders (Chart 4) and homebuilders (Chart 5). Airlines are down more than 5% on surging oil costs. That's putting downside pressure on the Dow Transports which are testing their old high.

Chart 4

Chart 5

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DOW TRANSPORTS BACK OFF FROM OLD HIGH... The Dow Transports have been the strongest part of the market recently owing primarily to rising rail stocks which are benefiting from shipments of commodities like coal and grains. I recently pointed out, however, that the Dow Transports had reached a potential resistance barrier at last summer's high which would be a logical spot to expect some profit-taking to appear. The weekly bars in Chart 7 show the Dow Transports turning down from that barrier for the second time in three weeks. It's not a good sign for the market when its strongest group starts to weaken.

Chart 7

STOCK INDEXES WEAKEN ... The hourly bars in Chart 8 shows the Dow Industrials down 287 points and trading at the lowest level since mid-April. The hourly bars in Chart 9 show the S&P 500 down 26 points and in danger of falling to a new monthly low. With the stock market under heavy selling, bond prices are rallying. TIPs are especially strong.

Chart 8

Chart 9