AUSTRALIAN DOLLAR, COPPER, AND CHINA ARE RALLYING TOGETHER -- SO IS PLATINUM -- DOLLAR BEAR FUND IS RISING

CHINA ISHARES AND AUSSIE DOLLAR TEST 200-DAY AVERAGES... A week ago Friday I showed China iShares testing important resistance barriers. That's still the case. Chart 1 shows China iShares (FXI) testing not only its 200-day average, but its January high around 32. That's an important test for China and other markets that include stocks, commodities, and currencies. That same market message on April 3 pointed out that the recovery in China was boosting hopes for commodity prices and commodity currencies like the Australian Dollar. Chart 2 shows Australian Dollar Currency Shares (FXA) also testing resistance at its January high and its 200-day line. I believe the two markets are linked as the two charts seem to suggest. One commodity that has been leading the recent commodity rally is copper. That may be due to the fact that copper is usually closely tied to the Aussie Dollar.

Chart 1

Chart 2

COPPER IS COMMODITY LEADER ... Chart 3 compares the Aussie Dollar (green line) to the price of copper since the start of 2008. You can see a pretty strong linkage between the two. Both peaked together in mid-2008 and have been rallying together during the first quarter of this year. Both are trading at the highest level in six months. Chart 4 plots the Barclays iPath Copper ETN (JJC) over the last year. Since its December low, the JJC has gained 60%. It's now approaching a test of its 200-day moving average. Although copper looks over-extended, and could meet resistance at its long-term moving average, the fact that it's leading the commodity complex higher is a good sign for the global economy. These charts tell us three things. When the global economy bottoms, three likely upside leaders will be China, copper, and the Aussie Dollar. We may already be seeing the start of that bottoming process.

Chart 3

Chart 4

PLATINUM PLAYS CATCHUP... Although a lot has been written about gold and silver, little has been said about platinum. It may be time to start paying better attention, because platinum is currently the strongest of the precious metals. Chart 5 simply shows that gold and platinum have been closely linked over the last ten years. In other words, they generally rise and fall together. During 2008, however, platinum fell a lot harder than gold (probably because platinum is tied to catalytic converters in cars). While both precious metals have risen together since December, Chart 6 shows platinum rising faster. That may bode well for the longer-range outlook for the entire group. But it also suggests that investors might want to include some platinum in their calculations. The price bars in Chart 7 show the futures price of platinum trading at a six-month high and challenging its 200-day moving average (it reached $1250 in today's trading). The solid line in Chart 7 is the Barclays iPath Platinum ETN (PGM). [Some in the media are attributing the recent jump in platinum to Japanese spending to boost their economy. That could boost the Japanese auto sector which is good for platinum].

Chart 5

Chart 6

Chart 7

BEARISH DOLLAR FUND IS RISING ... Most foreign currencies (except for the yen) have been rallying against the U.S. Dollar since the start of March. One way to play that is to buy some individual foreign currencies. Another way is to buy a fund that rises when the dollar falls -- like the Power Shares DB US Dollar Index Bearish Fund (UDN) shown in Chart 8. Since the UDN is an "inverse" fund, it rises when the U.S. Dollar Index falls. Chart 8 shows a potential "double bottom" having formed in the UDN between December and March. It's been consolidating above its 50-day average for the past month and appears headed up toward its 200-day line. That's bearish for the U.S. Dollar. But it's bullish for this dollar bear fund.

Chart 8