FALLING DOLLAR BOOSTS COMMODITY ASSETS -- FREEPORT MCMORAN FOLLOWS COPPER HIGHER -- ANADARKO PETROLEUM GIVES ENERGY SECTOR A BOOST -- MICROSOFT SHOWS NEW MARKET LEADERSHIP
DOLLAR BREAKS TRIANGLE SUPPORT LINE... Arthur Hill and myself have described the sideways consolidation pattern in the U.S. Dollar Index ETF (UUP) as a bearish triangle which is identified by two converging trendlines. The UUP has clearly broken the lower support line this week which suggests the start of another dollar downleg. The asset class that benefits most from a falling dollar is commodities and stocks tied to them. Not surprisingly, both are doing very well today.
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Chart 1
COMMODITY ETF BREAKOUTS ... When the dollar falls, commodities usually rise. And that's what they're doing. Chart 2 shows the DB Commodities Tracking Fund (DBC) trading above its June high in an upside breakout. All market groups are participarting. Chart 3 shows the Energy ETF (DBE) on the verge of an upside through its June high. Two groups that have already done so are precious and base metals. Chart 4 shows the Base Metal ETF (DBB) surging to a new three month high. The DBB is comprised of aluminum, zinc, and copper.
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Chart 2
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Chart 3
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Chart 4
FREEEPORT MCMORAN RIDES RISING COPPER TREND... A couple of weeks ago (July 16) I showed Freeport McMoran Copper & Gold (FCX) testing a resistance line drawn over its 2011 peaks. Since then, the copper stock has broken that resistance line to touch a three-month high. Its relative strength line (below chart) has been rising since mid-May. Since FCX gets most of its revenue from copper, it's closely tied to that commodity. The line on top of Chart 5 shows copper also trading at a three month high. The stock's 2% gain makes it the day's top performer in the materials group.
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Chart 5
ANADARKO BOOSTS ENERGY SECTOR... Energy stocks continue to benefit from rising energy prices. Chart 6 shows the Energy SPDR (XLE) nearing a test of its spring high. Its relative strength line (below chart) has been rising since June. One of today's strongest energy stocks is Anadarko Petroleum (APC). Chart 7 shows the stock climbing more than 2% (on rising volume) and nearing a test of its April high. Its RS line (below chart) is rising as well.
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Chart 6
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Chart 7
"MICROSOFT SHOWS NEW LEADERSHIP"... This is the same headline used in my July 16 message regarding Microsoft. At the time, the large tech stock was challenging its late April high just below 27. Since then, the stock has decisively broken through that chart barrier on rising volume. Its relative strength line (below chart) is also rising again. That shows new absolute and relative strength in this stock for the first time in a long time. That's also new leadership.
