HOMEBUILDERS JOIN RATE SENSITIVE GROUPS WITH RETREAT -- EURO BOUNCES OFF NECKLINE SUPPORT -- DOLLAR WEAKENS, BUT HOLDS BREAKOUT -- GOLD FIRMS NEAR APRIL LOWS -- CORN CHALLENGES RESISTANCE -- SOYBEANS BREAKOUT WITH BIG MOVE

HOMEBUILDERS JOIN RATE SENSITIVE GROUPS WITH RETREAT... Link for today's video. Stocks continue to price in a change in Fed policy by marking down interest rate sensitive shares. John Murphy and I commented on recent weakness in utilities and REITs. Treasuries are also falling sharply as Treasury yields surge. Homebuilders joined in today as the Home Construction iShares (ITB) and Homebuilders SPDR (XHB) fell sharply on Wednesday. Even though the connection between interest rates and home sales is pretty clear, the long-term trends remain up for ITB and XHB. In addition, the 10-year Treasury Yield ($TNX) is still low by historical standards and remains well below 2.5%. Chart 1 shows ITB becoming overbought after a 20% advance in just four weeks. The ETF peaked around 26 and fell below 25 on Wednesday. As the blue trend line shows, the bigger trend remains up and the ETF did hit a new high just a few weeks ago. Broken resistance and the 50% retracement mark first support in the 24 area. Chart 2 shows XHB hitting the upper trend line of a rising channel in mid May and pulling back the last two weeks. Broken resistance and the 50% retracement mark first support in the 30-30.50 area.

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Chart 1

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Chart 2

EURO BOUNCES OFF NECKLINE SUPPORT... The Euro remains in a long-term downtrend, but the currency is showing signs of life with a bounce off support. Chart 3 shows weekly prices for the Euro Index ($XEU). The index broke down in February and then consolidated with a sideways move the last few months. The April high and a small buffer mark resistance at 133. MACD remains below its signal line and in negative territory. This long-term chart remains bearish.

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Chart 3

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Chart 4

Things get interesting when we look at the daily chart for the Euro Currency Trust (FXE). Chart 4 shows FXE hitting support in the 127 area last week and firming the last two weeks. The head-and-shoulders pattern remains possible, but a break below support at 126.50 is needed for confirmation. First resistance is set at 129 and a close above this level would argue for a successful support test. A follow through break above 131 would fully reverse the downtrend.

DOLLAR WEAKENS, BUT HOLDS BREAKOUT ... The Dollar fell against the Euro and Yen on Wednesday, which means the US Dollar Index ($USD) weakened. First, let's review the long-term chart. Chart 5 shows the index with a flag breakout and a larger rising channel. The lower trend line and flag low combine to mark long-term support in the 80-81 area. The upper trend line of the rising channel extends to the 88 area in September for a target.

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Chart 5

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Chart 6

Chart 6 shows the US Dollar Fund (UUP) with a flag/channel breakout and this breakout area turning first support in the 22.5-22.6 area. The breakout is holding as volatility picks up. Notice how the ETF crossed the 22.80 level seven times in the last two weeks. I am going ignore these day-to-day swings and focus on the breakout until it is proven otherwise. A move below 22.50 would negate the breakout and argue for a reassessment.

GOLD FIRMS NEAR APRIL LOWS... After a plunge below 1400 two weeks ago, Spot Gold ($GOLD) managed to firm the last two weeks and hold support in the 1300-1350 area. At this point, gold is just firming within a downtrend. We have yet to see a surge off support that would suggest anything else. Chat 7 shows Spot Gold with key resistance set at 1500 now. Gold failed near 1500 in April and has been below this level for seven weeks now. The indicator window shows the Commodity Channel Index (CCI) remaining in oversold territory. A move above the red resistance line, which marks the January highs, would provide the first sign of improving momentum. Such a move would likely occur before a break above 1500 and should be seen as the early signal for an upturn.

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Chart 7

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Chart 8

Chart 8 shows the Gold SDPR (GLD) consolidating near the April low. The ETF is getting a small bounce on Wednesday as the Dollar weakens. This bounce, however, has yet to break first resistance at 137.50. At the very least, a breakout here is needed to solidify support and show significant buying pressure. Further up, the April-May highs and a small buffer mark key resistance. The indicator window shows RSI trading in its bear zone (20-60) for several months. A break above 60 is needed to turn momentum bullish here.

CORN CHALLENGES RESISTANCE ... Commodities have been generally weak in 2013, but the Teucrium Corn Fund (CORN) and Teucrium Soybean Fund (SOYB) are showing signs of life with big moves the last few days. Chart 9 shows CORN forming a potential double bottom over the last two months. The intermittent high marks resistance in the 42.5 area and a breakout here would confirm the bullish reversal pattern. The upside target would be to the 45.5 area, which is confirmed by broken support and the early February high. The indicator window shows RSI failing to hold its breakout at 60 in late March and moving back to oversold levels in early April. With this failure, the bear zone remains for RSI and it would take another break above 60 to turn momentum bullish.

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Chart 9

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Chart 10

Chartists should keep in mind that the Corn Fund is an ETN based on a basket of futures contracts. While it is designed to track corn prices, it is not an exact copy and there will be discrepancies. Fortunately, StockCharts.com provides end-of-day (EOD) data for an array of futures contracts (search for ^ in the symbol catalog). Chartists can use these futures prices for analysis and timing related to the ETF or ETN. Chart 10 shows July Corn (^CN13) with a different pattern evolving. The overall trend is down with broken support turning resistance in the 660-670 area. July Corn is challenging resistance here and a breakout would be quite positive.

SOYBEANS BREAKOUT WITH BIG MOVE... Chart 11 shows SOYB with a volatile bottom in April and a breakout in late May. This breakout appears to reverse a downtrend that started in September. Broken resistance in the 24-24.25 area turns into the first support zone. RSI confirms this breakout with a move above 60.

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Chart 11

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Chart 12

Chart 12 shows July Soybeans (^SN13) breaking out of a seven month consolidation. The indicator window shows RSI moving above 70 for the first time in over seven months. Even though this move above 70 signals overbought conditions, it is also a sign of strength because it takes strong buying pressure to push RSI above 70.