CSX AND OTHER RAIL STOCKS PULL TRANSPORTS SHARPLY LOWER -- THAT'S MAKING INDUSTRIALS THE DAY'S WEAKEST SECTOR -- FALLING PRICE OF OIL WEAKENS ENERGY STOCKS -- GOLD MINING ETF RESUMES UPTREND WITH THE COMMODITY NOT FAR BEHIND
TRANSPORTS HAVING A VERY BAD DAY... Just a day after reaching a new two-month high, transportation stocks are the day's weakest group. The daily bars in Chart 1 show the Dow Jones Transportation Average falling more than 3% today. And it's being led lower mainly by rail stocks. Chart 2 shows the Dow Jones Railroad Index tumbling more than 6% today and dropping to the lowest level in more than three months. The biggest rail loser is CSX which has lost more that 10% today. Chart 3 shows CSX falling below its 200-day moving average to the lowest level in four months. And on very heavy volume. Other rail stock are also falling, but not as much. That certainly puts in jeopardy the upside breakout in transports that took place late last week and earlier this week. Falling transports are also making the Industrial SPDR (XLI) the weakest sector of the day.
FALLING PRICE OF OIL WEAKENS ENERGY STOCKS...Another recent upside breakout is in jeopardy. Chart 4 shows the United States Oil Fund (USO) recently climbing above its 200-day moving average. But it has since fallen back below that long-term resistance line. And in heavier trading. That's hurting energy stocks. Chart 5 shows the Energy SPDR (XLE) also trading back below its 200-day line after a minor move to the upside. The XLE is now heading toward a test of its July low and its 50-day moving average. Not all commodities are falling however. Precious metals are having a strong day. And stocks tied to them.
GOLD AND SILVER GAIN GROUND...Money continue to rotate into precious metals. Chart 6 shows the Gold SPDR (GLD) gaining 1.3% today which is the equivalent of $17. GLD has been consolidating over the past month after rising to a six-year high. It may be getting ready to resume that uptrend. Odds of that happening are increased by the fact that gold miners are already in new high ground. The bars in the upper box show the VanEck Gold Miners Index (GDX) resuming its uptrend to a new three-year high. It's normal for gold miners to lead the metal higher during an uptrend. Silver and its miners are having an even stronger day.
Chart 7 shows Silver iShares (SLV) gaining 2.5% today and rising to the highest level since February. And it's doing so on rising volume. Silver miners are doing even better. Chart 8 shows the Global X Silver Miners ETF (SIL) challenging its February high and nearing a potential upside breakout. There again, mining stocks usually rise faster than the commodity in an emerging uptrend. Lower global interest rates and weaker currencies (including the dollar) may be pushing investor funds into precious metals. An overbought stock market rally that's starting to look a bit tired may also be causing investors to look for other alternatives. That usually includes precious metals and stocks tied to them. The price of gold has risen faster than silver since the end of May. That may explain the recent surge into silver as investors take advantage of its cheaper price. Silver miners are playing catch up as well. It's also a good sign for both metals when they're rising together. As they're starting to do now.
