BASE METALS ETF STALLING AS SPY HITS NEW HIGH -- BONDS HIT RESISTANCE AS YIELDS HIT SUPPORT -- FED ADMITS TO A LITTLE INFLATION -- RETAIL ETFS HIT NEW 52-WEEK HIGHS -- VIEWING CANDLEGLANCE CHARTS

BASE METALS ETF STALLING AS SPY HITS NEW HIGH... CandleGlance charts make it easy view and compare the key intermarket areas. I realize that these charts are small and not well suited for detailed analysis. These represent another charting alternative available at StockCharts.com. Details on creating these charts can be found at the end of this commentary. The first CandleGlance group shows three commodities and the S&P 500 ETF (SPY). I opted to use West Texas Intermediate Futures ($WTIC) because it reflects oil prices better than the USO Oil Fund (USO). Crude and the Gold SPDR (GLD) are in clear uptrends. SPY is also in an uptrend as the ETF recently recorded a new 52-week high. The Base Metals ETF (DBB) remains in an uptrend overall, but is clearly the laggard of the group. DBB hit resistance in early February and this area held throughout March and April. Base Metals have not followed oil, gold and stocks to new highs. Relative weakness is potentially negative for stocks because Base Metals are more economically sensitive. Demand for copper, aluminum and zinc increases along with economic activity. By the way, the Base Metals ETF consists of just three metals: copper, aluminum and zinc. At this point, the negative effect is just potential because DBB is not actually broken down. Support from the March lows holds the key. A move below this level would show material weakness in base metals and be negative for stocks.

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Chart 1

BONDS HIT RESISTANCE AS YIELDS HIT SUPPORT... The second intermarket group represents bonds, interest rates, stocks and the Dollar. Stocks (SPY) and Bonds (TLT) had a clear negative relationship from November to February. Stocks moved higher as bonds moved lower. This negative relationship is now getting tested as both work their way higher. Yes, the SPY and the 20+ year Bond ETF (TLT) are both up since mid February. Even though TLT is up the last two months, the ETF is running into resistance from the March high. Also notice that the 10-year Treasury Yield ($TNX) is near a support zone from the January lows. With the Fed hinting at inflationary pressures today, bonds may have trouble getting through resistance and yields may hold support. The fourth chart shows the US Dollar Fund (UUP) in a clear downtrend. This supports the rise in commodities and gold.

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Chart 2

FED ADMITS TO A LITTLE INFLATION... The Fed policy statement came and went without much fanfare. Pundits may be waiting for the first ever press conference. The Fed noted that economic growth was moderate, the employment picture was improving and the pickup in inflation was temporary. The Fed attributed inflationary pressures to the sharp rise in commodity prices over the last several months. This assumes that inflationary pressures will ebb when commodity prices turn lower. There is just one problem: there is not much evidence of weakness. PerfChart 3 shows several commodities along with the 20+ year Bond ETF (TLT) over the last 200 days. The Agriculture ETF (DBA), the Base Metals ETF (DBB), West Texas Intermediate Futures ($WTIC) and Copper Futures ($COPPER) are all up more than 30% since mid July. Oil and copper are up more than 40%. These are not small gains. Either these price increases are passed on or profit margins may get squeezed. This PerfChart also includes the 20+ year Bond ETF (TLT), which is down over the last 200 days. This is unsurprising because bonds loathe inflation.

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Chart 3

RETAIL ETFS HIT NEW 52-WEEK HIGHS... We can argue about overbought conditions and extended moves, but it is hard to argue with new 52-week highs. Such highs show strength, pure and simple. Chart 4 shows the Retail HOLDRS (RTH) surging above 110 to record a new high today and chart 5 shows the Retail SPDR (XRT) moving above 53 for a new high. Retailers represent an important group in the stock market. First, many retailers are part of the consumer discretionary sector, which is the most economically sensitive. Second, retail spending accounts for some 2/3 of GDP. The performance of retail stocks should reflect expectations for the economy. With both ETFs at new highs and showing relative strength, retailers indicate that the economic outlook remains strong.

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Chart 4

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Chart 5

VIEWING CANDLEGLANCE CHARTS... Subscribers can view CandleGlance charts using any favorites list. I created a list called intermarket and pulled up one chart from this list. The CandleGlance option can be accessed by clicking the view all link just above the SharpChart.

Chart 6

View all will show 10 charts per page. Users can view CandleGlance charts by changing the list format at the top of the page.

Chart 7

Once CandleGlance format is selected, users will see a page with up to 30 CandleGlance charts. The duration can be set from two days to one year and various indicators can also be added. Chartists can also view small P&F charts this way.

Chart 8