WEAKER DOLLAR GIVES BOOST TO COMMODITIES AND RELATED STOCKS -- MONSANTO LEADS MATERIAL STOCKS HIGHER -- EXXON MOBIL LEADS STRONG ENERGY SECTOR AND TESTS ALL-TIME HIGH -- S&P 500 NEARS NEXT UPSIDE TARGET AT 1440
FALLING DOLLAR BOOSTS COMMODITIES... The U.S. Dollar Index has been on the defensive for the last two weeks, and is again today. Chart 1 shows the Power Shares Dollar Index Bullish Fund (UUP) bearing down on its 200-day moving average once again (see circle). The UUP bounced off that support line a month ago. It's being tested again. Interestingly, recent dollar weakness hasn't given much of a boost to commodity prices -- until today. Chart 2 shows the DB Commodities Tracking Fund (DBC) bouncing impressively off two support lines. One is its 200-day moving average (red arrow). The other is the flat line drawn over its November peak. In chart work, previous peaks are supposed to become new support. So far, it appears to be doing that.
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Chart 1
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Chart 2
MONSANTO LEADS MATERIALS HIGHER... With commodities rebounding, basic material stocks are one of the day's strongest groups. Chart 3 shows the Materials Select SPDR (XLB) nearing a test of its February high. The XLB/SPX ratio (below chart) shows that materials have been market laggards since the start of February. That may be starting to play catch-up. One of the stronger stock in that group is Monsanto. The firm provides seed and other products to farmers. Chart 4 shows Monsanto (MON) jumping 2.6% today and nearing a test of its February high. Its RS line (below chart) has been weak since February, but may be starting to strengthen.
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Chart 3
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Chart 4
EXXON MOBIL LEADS STRONG ENERGY SECTOR... Energy stocks are also rising nicely today on the back of rising energy prices. Chart 5 shows the Energy Sector SPDR (XLE) bouncing off its 200-day moving average. It still has to regain its 50-day line, however, to restore its uptrend. The falling relative strength ratio (below chart) shows how much of a laggard energy shares have been. One of the strongest (and biggest) of the energy stocks is Exxon Mobil. Chart 6 shows Exxon Mobil (XOM) in the process of challenging its 2012 highs. Its RS line (below chart) has been weak as well. Even so, a new 52-week high would restore the stock's uptrend. It would also put the stock at the highest level in four years. The weekly bars in Chart 7 show the stock in the process of also testing its all-time high reached during 2008. Needless to say, a decisive close above the previous chart barrier would be a positive development for the stock (and possibly for the entire group).
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Chart 5
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Chart 6
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Chart 7
S&P 500 NEARS NEXT TARGET AT 1440 ... The S&P 500 continues to climb toward its next upside target which is the spring 2008 peak near 1440 (see line). It's currently about 20 points (1.5%) from that target. I think there's a strong chance that the SPX will eventually reach its 2007 all-time high. But it may need some consolidating or correcting before it gets there. The 14-week RSI (top of chart) is currently at 68 which is very close to overbought territory at 70. The last time the weekly RSI rose above 70 was last January, which was just before a spring correction started. Speaking of spring, many of you are no doubt aware that April is one of the best months of the year to take some profits. That's because it ends the six-month run from November to April which is usually the strongest half of the year. April also leads into May when market rallies often stall ("sell in May"). The daily bars in Chart 9 show the two closest support levels to be at 1391 (last week's low) and the 50-day average (blue line) which is currently at 1365. Prices would have to fall below both of those support levels to signal that a correction has started. So far, there's no sign of that happening.
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Chart 8
