COMMODITY BOUNCE CONTINUES AS OVERBOUGHT DOLLAR PULLS BACK -- BEAR WEDGE FOR THE S&P 500 IS STILL INTACT

CRB BOUNCES OFF SPRING LOW... Last week I wrote about the Reuter/Jefferies CRB Index testing chart support at its March low near 380. So far, that support has held. The CRB Index rose nearly 15 points today for one of its biggest gains in years. Chart 1 also shows the CRB ending the day back over its 200-day moving average. Chart 2 shows the DB Commodities Tracking Index ETF (DBC) bouncing off its 200-day moving average. Despite that improvement, I'm skeptical that the commodity rally is the start of a new upleg. Short-term momentum, however, has improved for commodities and their related stocks.

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GOLD STILL IN DOWNTREND ... Gold and gold stocks rallied sharply today. Charts 3 and 4, however, show that the streetTracks Gold ETF (GLD) and the Market Vectors Gold Miners ETF (GDX) are still well below their spring/summer lows and moving average lines. Both ETFs have a long ways to go to turn their main trend back up again. Crude oil and energy stocks look a bit stronger.

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CRUDE BOUNCES OFF 200-DAY LINE... On Tuesday, I showed the United States Oil Fund (USO) bouncing off chart support at its 200-day moving average. Today's 4.6% gain has added to those gains. The USO, however, is still well below its 50-day line. Chart 6 shows the Energy SPDR (XLE) bouncing off chart support near its March low. It remains below both moving average lines however. Much of this week's commodity bounce is the result of a pullback in an overbought U.S. Dollar. Chart 7 shows the PowerShares US Dollar Bullish Fund pulling back from chart resistance at its February high. Its 14-day RSI line is also pulling back from overbought territory over 70. The UUP remains well above its 200-day moving average and appears to have bottomed. That should keep the commodity bounce from lasting very long.

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RISING WEDGE STILL INTACT... On Tuesday, I drew a "rising wedge" pattern on the hourly bars of the S&P 500. Chart 8 shows what it looks like after today's bounce. The S&P gained 3 points today to end at 1277. That still keeps it below the lower line which should now act as a resistance barrier. The S&P needs to close back above the lower line to negate that bearish pattern. Today's bounce was on light volume and not broad based. The Nasdaq and small caps ended the day in the red. So did the financials. One key question for the market is whether it can withstand the recent upturn in oil and other commodities.

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