FALLING GREENBACK BOOSTS CANADIAN DOLLAR -- IT'S ALSO PUSHING COMMODITY PRICES HIGHER -- ENERGY SPDR ACHIEVES BULLISH BREAKOUT -- OIL SERVICE ETF IS ALSO TURNING UP -- ENERGY LEADERS ARE SCHLUMBERGER, BAKER HUGHES, AND MARATHON OIL
FALLING DOLLAR BOOSTS COMMODITY CURRENCIES... The falling U.S. dollar continues to support commodity prices and currencies tied to commodities. Chart 1 shows the PowerShares Dollar Index (UUP) falling to the lowest level in two months. A falling dollar is positive for foreign currencies, especially those of commodity producing countries. My last message showed the Canadian Dollar in the process of turning higher. Chart 2 shows the Canadian Dollar ($CDW) trading at a two-month high after clearing a falling resistance line drawn over its May/June highs. Other commodity currencies that are benefiting in similar fashion are the Aussie Dollar, the Mexican Peso, the South African rand, and the Russian ruble. As I suggested in a previous message, rising commodity currencies are a bet on rising commodity prices. That combination is also benefiting countries that export commodities in developed and emerging markets, and especially their stock ETFs quoted in dollars.
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Chart 1
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Chart 2
FALLING DOLLAR BOOSTS COMMODITIES... As usually happens when the dollar drops, commodity prices are rising. Chart 3 shows the PowerShares Commodity Fund (DBC) climbing back over its 50-day average after bouncing off its 200-day line at the start of August. The three groups leading the DBC higher are metals (industrial and precious) and energy. Chart 4 shows the PowerShares Base Metals Fund (DBB) trading at a new high for the year. The DBB includes aluminum, copper, and zinc. The strong performance by that economically-sensitive group is a good sign for the global economy and stocks, as well as shares tied to industrial metals. Chart 5 shows the PowerShares Precious Metals Fund (DBP) also in an uptrend. The rise in energy shares has drawn a lot of attention lately, owing to the simultaneous rise in the price of crude oil. Chart 6 shows the PowerShares Energy Fund (DBE) also rising back above its 50-day average. [The DBE include light and brent crude, gasoline, heading oil, and natural gas]. Rising energy prices are good for energy stocks (and vice versa). And energy stocks are doing very well of late.
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Chart 3
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Chart 4
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Chart 5
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Chart 6
ENERGY SPDR BREAKS THROUGH OVERHEAD RESISTANCE... With oil prices rising again today, energy shares are the strongest part of the stock market. And they're having a good chart day. The daily bars in Chart 7 show the Energy Sector SPDR (XLE) breaking through its June/July highs to achieve a bullish breakout. It gets even better. The weekly bars in Chart 8 show the XLE also trading above the intra-day peak formed last October just above 70 (70.31). A close above that level would put the XLE at the highest level in more than a year and leave little doubt that the energy sector has bottomed. Rising energy shares are also a bet on higher energy prices. The XLE/SPX ratio (top of chart) shows energy shares helping lead the rest of the market higher.
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Chart 7
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Chart 8
OIL SERVICE ETF ALSO TURNS UP ... Oil service stocks are also having a good chart day. Chart 9 shows the VanEck Vectors Oil Services ETF (OIH) gaining more than 3% today and climbing to the highest level in a month. The OIH has climbed back over its 50-day average and has broken a falling trendline extending back to June. The OIH/SPX ratio (top of chart) is also turning up.
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Chart 9
OIL LEADERS... Chart 10 shows Schlumberger (SLB) trading at the highest level since last August after recently clearing major resistance along last October's high. Its relative strength ratio (top of chart) has been rising since January and appears to be on the verge of an upside breakout of its own. SLB is the biggest holding in OIH with a weight of 20% (and the third biggest stock in the XLE). Its upside breakout is a good sign for both energy ETFs. Chart 11 shows Baker Hughes (BHI) trading at an eight month high after exceeding the previous peak set in early May. Its relative strength ratio (top of chart) has broken out as well. Both of those stocks are OIH leaders.Today's last chart shows one of the day's strongest performers in the Energy SPDR (XLE). Chart 12 shows Marathon Oil (MRO) breaking out to the highest level since December. Its relative strength ratio (top of chart) is doing the same. Things are looking up for the energy sector, and the price of oil. [WTIC crude is trading $1.36 (2.9%) higher today and trading over $48 for the first time in six weeks. Brent crude is up $0.93 (1.8%) and trading above $50 for the first time since the end of June].
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Chart 10
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Chart 11
