Commercial Real Estate (VNQ)
VNQ has been in a narrow trading range, tracking below the 200-day (Blue Line). A break above $32.50 is needed to get me interested or a breakdown that shakes out some current shareholders.
Transportation (IYT)
A break of $52.50 would be bad and indicate that a retest of the lows was under way. A break above $55 could carry IYT to retest the $62 high and the 200-day at $63.23.
Financials (KBE)
Financials are in a still pulling back from the May 5th highs and may work down to the old breakout at $15. A break above $18.50 would get me interested.
I want to note that KBE did break above $18.50 this morning and I did not buy it. I was concerned that it would not be able to carry much higher after the size of yesterday’s advance. I was right. I have seen too many failed breakouts recently and am a little leery.
Energy (XLE)
XLE has teste the 20-day (Green Line) on numerous occasions since the March lows (Green Arrows). A break above $50 is good and a break below $47.50 is bad.
Oil Service (OIH)
I had to double check to make sure that this wasn’t the chart of XLE…
Same story as XLE - the 200-day is a brick wall and until it is taken out, nothing happens. Unless something dramatic happens, this will be one of the first things that I own when I start buying.
Homebuilders (XHB)
A break above $12.75 is good and a break of $11.83 is bad. Notice how XHB has already retraced 38% of the March low to May high. That makes this a weak sector, along with Financials and Transports. I want to focus on leaders and not so much on laggards. I will need to watch these groups carefully. Your holdings are either pulling the market higher or hanging on for the ride up – you want the leaders in your portfolio!
Relative Strength in Commodities
I wanted to show you how the different types of Commodities are doing relative to one another. I show them from strongest to weakest.
Agricultural Commodities (DBA)
DBA has been the best performing commodities area. It has been able to break out of a base dating back to early October 2008. It has also cleared the 200-day (Blue Line). I will be looking to buy pullbacks into the Red Line (with a tight stop, of course).
Industrial Metals (DBB)
DBB crashed into the 200-day (Blue Line) and has been pulling back ever since. It now sits on the 50-day (Black Line). A break here could carry price down towards $13.
Energy
Crude Oil (USO) has been a substantial under-performer. It has barely broken above first resistance and is nowhere near its 200-day or the highs of December 2008.
I will focus on the leaders and not the laggards.
All Commodities (DBC)
The entire Commodities Complex can be owned in one ETF – DBC. You can see how DBC has lagged DBA because of its weighting in Energy.
DBC has now been basing (trading sideways) for 6 months, so a break above $23 and the 200-day will be very constructive.
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