GLOBAL STOCKS AND COMMODITIES JUMP ON FALLING DOLLAR -- MATERIALS AND ENERGY ARE DAY'S STRONGEST STOCKS -- GDX TRADES AT RECORD HIGH -- XLE BUILDS ON BULLISH BREAKOUT
STOCK INDEXES BOUNCE OFF CHART SUPPORT... Global stocks and commodities are off to a strong start today. U.S. stocks are following the lead of rising foreign shares. Today could be an important day for U.S. stocks if the market can hold and build onto this morning's gains. That's because U.S. stock indexes are bouncing off important chart levels along their August highs. Chart 1, for example, shows the Dow bouncing off its August high near 10700, while Chart 2 shows the S&P 500 bouncing off its August high near 1130; Chart 3 shows the Nasdaq Composite bouncing off its August high as well. In chart work, the ability of any market to stay above a previous breakout point (prior peak) is very important, In fact, it's crucial. So far, so good. Global intermarket trends remain positive: the U.S. Dollar is falling and the Euro rising; commodity prices (and stocks tied to them) are leading the day's rally. Materials (including gold) and energy are the two strongest stock groups.
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Chart 1
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Chart 2
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Chart 3
GDX NEARS RECORD HIGH -- XLE BUILDS ON BREAKOUT ... Gold and silver stocks are continuing to climb along with their respective commodities. Chart 4 shows the Market Vectors Gold Miners ETF (GDX) gapping higher this morning. A close over 57 would exceed the 2008 high and put the GDX at a record high. Energy stocks are continuing to climb as well. Arthur Hill commented on the bullish breakout in the Energy SPDR (XLE) last week as energy prices started to climb. Chart 5 shows the XLE trading at a new five-month high. Its rising relative strength ratio (below Chart 5) shows the recent surge in the energy group. That's a vote of confidence in the global economy. I'll take a closer look at the energy sector later today and point out which stocks are leading it higher. We'll also take another look at how the market fares this afternoon.
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Chart 4
