OIL SERVICE ETF BENEFITS FROM RISING OIL PRICE -- LEADERS INCLUDE BHI, NOV, AND RDC -- FRANCE AND GERMANY LEAD FOREIGN STOCK REBOUND -- RETAILERS LEAD CONSUMER DISCRETIONARY SPDR TO NEW HIGHS -- AMAZON.COM BREAKS OUT
OIL SERVICE STOCKS RALLY ... Oil service stocks are finally showing some bounce. The main reason for that was last week's upside breakout in crude oil to the highest level in fourteen months. The weekly bars in Chart 1 show the Market Vectors Oil Services (OIH) moving up toward a resistance line drawn over the highs of the past two years. The gray area plots a relative strength ratio of the OIH divided by the S&P 500. The OIH relative strength line has been weak since the start of 2011 when the price of crude peaked, and it has remained weak since then. The upside breakout in crude is finally giving oil service stocks a needed boost. The daily bars in Chart 2 show the OIH climbing above its mid-June peak today to turn its short-term trend higher. Its relative strength line (gray area) is finally showing signs of strength.
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Chart 1
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Chart 2
OIL SERVICE LEADERS... Two individual stock leaders in the OIH are shown below. Chart 3 shows Baker Hughes (BHI) trading at the highest level in ten months. Its relative strength line (gray area) has jumped sharply over the last week. Chart 4 shows National Oilwell Varco (NOV) breaking out to the highest level in in six months. Its relative strength line is rising as well. Two other percentage gainers today (not shown) are Cameron International (CAM) and Rowan (RDC). This group is especially sensitive to rising oil prices and is one good way to benefit from that trend.
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Chart 3
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Chart 4
EUROPE LEADS GLOBAL BOUNCE... European stocks are leading today's bounce in global stocks. Last week's ECB statement in favor of continuing low interest rates is probably helping to stabilize Euro stocks. Chart 5 shows the Dow Jones France Stock Index (FRDOW) bounce sharply off its 200-day moving average and chart support along its April low. It still needs, however, to clear its 50-day line and mid-June peak. Chart 6 shows a similar pattern for the Dow Jones Germany Stock Index (DEDOW) which is finding support above its 200-day average and April trough. German stocks still have along way to go to turn their trend convincingly higher. Their ability to find support in an important support area, however, is encouraging and is helping to support stocks in the U.S. It's much harder for U.S. stocks to rally when foreign stocks are falling.
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Chart 5
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Chart 6
RETAILERS LEAD CYCLICALS TO NEW HIGHS... Chart 7 shows the Consumer Discretionary SPDR (XLY) hitting a new record high today. The rising relative strength line (above chart) shows leadership by this economically-sensitive sector. A lot of that leadership is coming from retailers. Chart 8 shows the S&P Retail (SPDR) also touching a new record today -- with a rising relative strength ratio. Leadership by both groups is normally an encouraging sign for the stock market and the economy. Chart 9 shows Amazon.com hitting a new high as well. Its relative strength ratio (above chart) bottomed during May and is now rising.
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Chart 7
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Chart 8
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Chart 9
MACY'S AND PRICELINE ARE TWO OTHER RETAIL LEADERS... Two other retail leaders-- Macy's and Priceline.com -- were among the biggest retail percentage leaders today. Both are trading at record highs today. Chart 10 shows their relative strength ratios compared to the S&P 500 (flat black line). The blue line shows the Priceline.com (PCLN) /S&P 500 ratio exceeding its 2012 high. The red line shows the Macy's (M) /S&P 500 ratio trading at a new high as well.
Chart 10
