ENERGY SPDR CLEARS 200-DAY AVERAGE -- ENERGY LEADERS INCLUDE CHEVRON, EXXON MOBIL, PIONEER NATURAL RESOURCES, EOG, AND SCHLUMBERGER -- S&P METALS AND MINING SPDR REACHES NINE-MONTH HIGH
ENERGY SPDR TRADES ABOVE 200-DAY MOVING AVERAGE... My weekend message showed the Energy Sector SPDR (XLE) rising up to test its 40-week moving average for the third time since last May. I also pointed out that weekly MACD lines had already exceeded their fourth quarter highs, which increased the odds that energy stocks and the price of oil had bottomed. Chart 1 shows the XLE trading over its 200-day line today (the equivalent of the 40-week average). That's the first time it's done that since the fourth quarter of 2014. The XLE/SPX ratio (top of chart) shows energy stocks helping lead the market higher since January. Energy stocks are today's top gainers as well (along with miners which are tied to rising metals prices). It's a good day for commodity bulls. That's also helping support the broader stock market which is higher today.
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Chart 1
CHEVRON LEADS DOW HIGHER... Chevron (CVX) is the second biggest holding in the XLE (14%), and is the day's biggest percentage gainer in the Dow Industrials. The daily bars in Chart 2 show Chevron in the process of rising above its November high. In addition, its 50-day average (blue line) has crossed above its 200-day average (red line). The CVX/SPX ratio is trading near the highest level since last May. Its certainly looks like a stock that has bottomed. Exxon Mobil (XOM) isn't far behind. Chart 3 shows XOM nearing a test of its November high. Its moving averages are in positive alignment as well, as is its relative strength ratio. Exxon Mobil is the biggest holding in the XLE (18%). The top five percentage gainers in the S&P 500 are energy stocks.
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Chart 2
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Chart 3
MORE ENERGY LEADERS ... The next three charts are among the largest holdings in the XLE. And they all look positive. Chart 4 shows Pioneer National Resources Co. (PXD) on the verge of breaking through its fourth quarter high near 150. Chart 5 shows EOG Resources (EOG) trading above its 200-day average. Chart 6 shows Schlumberger (SLB) doing the same. There are several others. Energy shares are rising on the back of expectations for higher oil prices. The price of WTIC crude has risen to $42 and is on the verge of a new four-month high.
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Chart 4
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Chart 5
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Chart 6
MINING & METAL SHARES HIT NEW HIGHS... Shares tied to industrial and precious metals are rising as well. Chart 7 shows the S&P Metals & Mining Index (XME) reaching the highest level in nine months. The XME/SPX ratio (top of chart) shows strong relative performance since the start of the year. Among the metal leaders are miners of copper, gold, silver, and steel. Combined with rising energy shares, the fact that stocks tied to metals are doing so well strongly suggests that commodity prices have bottomed. A lot of that is tied to a weaker dollar. Rising commodity prices also explain why stocks and currencies in commodity producers like Australia, Canada, Latin America, and Russia are so strong today. We'll take a closer look at mining leaders tomorrow.
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Chart 7
MATERIALS SPDR NEARS UPSIDE BREAKOUT... Basic materials are one of the day's strongest sectors on the back of rising commodities. Chart 8 shows the Materials SPDR (XLB) moving out of a small continuation pattern and headed up for a test of its fourth quarter high (see circle). It's already cleared its 200-day average. Freeport McMoran (FCX) is leading the XLB higher on the back of a strong copper market. A close above its fourth quarter high would confirm a bottom in this economically-sensitive sector. That would be good for global stocks. Rising commodity prices are also boosting bond yields today, which is giving a lift to financial stocks like banks, brokers, and life insurers. That's another plus for the the stock market which is seeing nice gains today.
