STOCK AND COMMODITY REBOUND CONTINUES AS EURO BOUNCES AND DOLLAR WEAKENS -- COMMODITY STOCKS LEAD REBOUND -- GLOBAL STOCK INDEXES RALLY TOWARD THEIR 50-DAY AVERAGES

EURO BOUNCES OFF 62% RETRACEMENT LINE ... Most of the U.S. Dollar strength since December has come from a falling Euro. Therefore, any bounce in the Euro has a big influence on the direction of global stocks and commodities. Chart 1 shows the Euro trading well below its 200-day moving average which means that it is still in a downtrend. Two technical factors, however, support a short-term rally attempt. One is the oversold reading in the 14-day RSI line (below chart). The other is the fact that the Euro has retraced 62% of its 2009 rally which usually functions as a support line as well. Another short-term positive is the strong rebound in commodity-based currencies like the Aussie and Canadian Dollars. Chart 2 shows the XAD bouncing sharply off its 200-day line, while Chart 3 shows the CDW clearing its 50-day line after holding support near its November low. With the U.S. Dollar on the defensive, commodity-related stocks are leading global stocks higher.

Chart 1

Chart 2

Chart 3

COMMODITY STOCKS LEAD RALLY ... Last Tuesday, I showed the Energy and Material SPDRs bouncing off their 200-day averages as evidence of a short-term bottom. Charts 4 and 5 show their rebound continuing today. A strong bounce in commodity markets is giving both sectors an added boost. The XLE is closer to its 50-day moving average. Gold stocks are also having a strong day (thanks to a $27 jump in bullion). Chart 6 shows the Gold Miners ETF climbing back above its 200-day line. Chart 7 shows GLD jumping back above its 50-day line after bouncing off long-term support near 100.

Chart 4

Chart 5

Chart 6

Chart 7

COMMODITY MARKETS JUMP ON WEAK DOLLAR... Most commodities are having an especially strong day. The CRB Index is climbing 7 points with the vast majority of commodities in the black. Chart 8 shows the CRB having found support near its 200-day line. Chart 9 shows the United States Oil Fund climbing 3.8%. It too is back above its red line. Copper is one of the day's strongest markets. Chart 10 shows the iPath Copper ETF jumping 4.6% today. It too recently bounced off its 200-day line. The chart picture looks pretty much the same for most global stock indexes.

Chart 8

Chart 9

Chart 10

GLOBAL STOCKS BOUNCE OFF 200-DAY LINES... I also wrote last Tuesday that the ability of so many global markets to bounce off their 200-day averages signalled a short-term bottom and a possible rally to their 50-day lines. Charts 11 and 12 show EAFE and Emerging Market iShares rallying off that long-term support line from short-term oversold condiltions (see RSI lines). Chart 13 shows the NYSE Composite Index (which has a heavy weight in material stocks) doing the same. The question now is whether they'll reach their (blue) 50-day lines and what they'll do when they get there.

Chart 11

Chart 12

Chart 13