NEW YEAR OFF TO A STRONG START -- STOCKS AND COMMODITIES ARE JUMPING WHILE BONDS ARE SELLING OFF -- COMMODITY CURRENCIES LEAD RALLY AGAINST THE DOLLAR -- OIL NEARS UPSIDE BREAKOUT AS ENERGY SPDR CLEARS 200-DAY LINE -- MASCO LEADS INDUSTRIAL SECTOR HIGHER
DOLLAR INDEX WEAKENS FROM OCTOBER PEAK ... One of the contributing factors behind today's jump in global stocks and commodities is the drop in the U.S. Dollar. Chart 1 shows the DB Bullish Dollar ETF (UUP) gapping lower today and threatening short-term support at its December low. That also keeps the UUP below its October high which is a natural resistance barrier. The 14-day RSI line (above chart) is threatening to drop below 50 which would imply more selling. The daily MACD lines (below chart) are turning negative. Although the Euro is bouncing today, most of the currency strength is coming from commodity currencies like the Aussie and Canadian Dollars. Chart 2 shows the Australian Dollar (XAD) jumping more than 1% and in position to challenge its December high and 200-day average. A close above those resistance barriers would imply that traders are taking on more risk as the markets enter the new year.
(click to view a live version of this chart)
Chart 1
(click to view a live version of this chart)
Chart 2
COMMODIITIES ARE JUMPING AS WELL ... The slumping dollar is giving a nice boost to commodity markets this morning. Chart 3 shows the DB Commodities Tracking Fund (DBC) gapping back over its 50-day line. Its RSI and MACD lines are showing improvement as well. The ability of the DBC to hold above its October low during December is another positive sign. The DBC, however, still has to contend with more formidable overhead resistance near its November high and 200-day line. Today's strong start suggests that it may reach those levels. Today's biggest commodity gainers are economically-sensitive copper, silver, and oil. Crude oil has the strongest chart pattern. Chart 4 shows the United States Oil Fund (USO) very close to to reaching a new seven-month high. That also explains why energy stocks are among today's strongest groups.
(click to view a live version of this chart)
Chart 3
(click to view a live version of this chart)
Chart 4
INDUSTRIAL AND ENERGY ETFS CLEAR 200-DAY LINES... Chart 5 shows the Energy SPDR (XLE) trading above its 200-day line. The fact that the shape of its pattern since October has a "triangular" look increases the odds for an upside breakout. Economically-sensitive industrial shares are already breaking out. Chart 6 shows the Industrials Sector SPDR (XLI) trading at the highest level since August. It just so happens that today's industrial leader is Masco which I used last Thursday as a example of an improving housing sector. Chart 7 shows Masco (MAS) jumping nearly 6% and trading above its 200-day average. The XLI also includes a number of transportation stocks which are having a strong day.
(click to view a live version of this chart)
Chart 5
(click to view a live version of this chart)
Chart 6
(click to view a live version of this chart)
Chart 7
DOW BREAKOUTS... It's always a good sign for the market when the Dow Industrials and Transports are breaking through resistance together. The next two charts show them both doing so today. Assuming those uptrends continue throughout the rest of day, and hopefully with more trading volume, the Dow now appears capable of reaching its July peak near 12750 sometime during January. The fact that utilities, which were one of the old year's strongest groups, are in the red today's also suggests that investors are starting off the new year in a more festive mood. Now it's a matter of seeing if the market can continue that festive mood through the rest of the day and week. But the new year is certainly off to a more promising start.
(click to view a live version of this chart)
Chart 8
