COMMODITIES CONTINUE TO RALLY ON FALLING DOLLAR AND DOVISH FED -- SILVER WHEATON LEADS SILVER ETF HIGHER -- SOUTHERN COPPER CLEARS 200-DAY LINE -- FEDEX AND DOW TRANSPORTS CLEAR 200-DAY LINES
U.S. DOLLAR FALLS TO FIVE-MONTH LOW ... Yesterday's dovish statement from the Fed that it was scaling back plans to raise short-term rates had the dual effect of pushing interest rates and the dollar lower. Chart 1 shows the Power Shares Dollar Index (UUP) falling to the lowest level in five-months today. The dollar is falling against all foreign currencies, especially those tied to commodities in developed and emerging markets. As is normally the case, commodity markets are getting the biggest boost from the falling dollar. That includes industrial and precious metals, energy, and stocks tied to them. The Fed's statement also shows a willingess (if not eagerness) to tolerate a pickup in inflation. That's giving a green light to commodity traders to load up. I've shown several of those groups rallying of late. I'm going to zero on a couple again today.
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Chart 1
GLOBAL X SILVER MINERS ETF SURGES ... My Market Message from March 7 focused on the upturn in ETFs and stocks tied to miners in general, which includes precious metals and steel. While most of the attention in precious metals is focused in gold, I've been looking at the sharp rise in silver stocks. Chart 2 shows the Global X Silver Miners (SIL) surging more than 6% to the highest level in ten months. Its relative strength ratio (top of chart) has surged as well. Although gold stocks have been first quarter leaders, silver stocks have actually done better since the middle of February. I explained on March 7 that buying in precious metals with industrial uses like palladium, platinum, and silver suggested this is more than just a "safe haven" play. It also fits into the trend of higher industrial metals in aluminum, copper, iron ore, and other base metals. That strengthens my view that commodity prices have most likely bottomed, as have stocks tied to them.
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Chart 2
SILVER WHEATON TAKES OFF... That earlier message showed Pan American Silver Corp (PAAS) hitting a new 52-week high to lead the silver group higher. It continues to do so. Chart 3 shows Silver Wheaton (SLW) climbing to the highest level since last June. [It's 50-day average has crossed above its 200-day line, which is a bullish sign (see circle)]. The stock's relative strength ratio has been surging as well. Silver Wheaton is the biggest holding the SIL ETF. Lower priced silver stocks like Coeur D Alene Mines (CDE) and Hecla Mining (HL) are also trending higher.
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Chart 3
GLOBAL X COPPER MINERS ETF IS CLEARING 200-DAY LINE... Previous messages have shown ETFs tied to gold, silver, and steel clearing their 200-day averages. Copper may be next. Chart 4 shows the Global X Copper Miners (COPX) climbing 7% today and trading over its 200-day line for the first time since 2014. Its relative strength ratio (top of chart) is climbing as well. The biggest stock in that group -- Freeport McMoran (FCX) -- is also testing its 200-day line. Chart 5 shows Southern Copper (SCCO) breaking through that line. The copper leader has also risen above a falling trendline drawn over its 2015 highs. The price of copper is up 2% today and trading at the highest level in four months. The red metal (not shown) is also testing its 200-day line.
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Chart 4
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Chart 5
DOW TRANSPORTS CLEAR 200-DAY LINE... Back on February 10, I showed the Dow Jones Transportation Average testing a major support line drawn under its 2009 and 2011 lows. Chart 6 is an updated version. I also pointed out that the TRAN was in a deeply oversold condition as measured by its 14-week RSI line (top of chart). [It was also oversold relative to the Dow Industrials and Utilities]. I further suggested than an upturn in the transports would be a positive sign for the rest of the market. There may be more good news on that front. Chart 7 shows the Dow Transports trading above its 200-day average for the first time since last May. It is also, however, right up against a resistance line extending back a year. A close above that line would be a lot more impressive. So far, most of the leaders have been in airlines and truckers. Today's leader is in the delivery business.
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Chart 6
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Chart 7
FEDEX SURGES 10%... Chart 8 shows today's transportation leader -- FedEx (FDX) -- surging 10%. That makes it the strongest stock in the S&P 500, the Industrial Sector SPDR (XLI), and the Dow Transports. It's having a big chart day as well. The daily bars in Chart 8 show FDX also rising above a falling trendine extending back to last June and its 200-day day average. And it's doing so in very heavy trading. Add FedEx to the growing list of stocks that have cleared their 200-day average.
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Chart 8
NYSE PERCENT OF STOCKS ABOVE 200-DAY MOVING AVERAGE TURNS UP... The previous Wedneday's message showed the % of NYSE stocks trading above their 200-day moving average moving up to challenge its fourth quarter high around 40% (after bottoming in January in oversold territory below 20%). Chart 9 shows the percentage figure having broken through that fourth quarter barrier to reach the highest level at 45% in eight months. That's a positive sign for the market. A further move above 50% would be even more positive.
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Chart 9
NYSE ADVANCE-DECLINE LINE BREAKS OUT... The same message from last Wednesday showed the NYSE Advance-Decline Line moving up to test its fourth quarter high. Chart 10 shows the NYAD having broken through that fourth quarter peak to reach the highest level since last May (when the market itself started peaking). Last spring, the NYAD line led the market lower. Now, it's leading the market higher. That upside breakout also strengthens the view that the stock correction that started last May has ended, and that prices are headed higher.
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Chart 10
CANADA AND MEXICO ARE LOOKING UP ... It's usually a good sign for the U.S. when two of its biggest trading partners start to do better. And they are. One above us, and one just below. Chart 11 shows Mexico iShares (EWW) clearing its 200-day average for the first time since late 2014. Mexico, and other Latin American countries, are benefitting from the rise in commodity prices, and oil in particular. That's giving a big boost to emerging market currencies and stocks. Canada is benefitting for the same reason. Chart 12 shows Canada iShares (EWC) clearing its 200-day line as well. [The Canadian Dollar cleared that line yesterday]. That strengthens my view that Canadian stocks have bottomed along with commodity prices. All of which is good for the U.S. market.
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Chart 11
