Lately, the market has been trying to decide which way it wants to go--one day it's up and the next day it's down. Although market internals are leaning towards the bears' side of the seesaw, the fact that the market-leading Dow Transports have been able to advance last week while the others stagnated is a big plus in the bulls' favor. September is historically a lackluster month for stocks but this market has shown a unique ability to defy the odds. While it's tempting to play the contrarian, I do think valuations are becoming quite heady and I think that being selective is the best course of action in this indecisive market.
Today's commodity highlights: Of metals, miners, and currencies
1. There's some bifurcation in the metals with the Base Metal exchange-traded vehicles (DBB, JJM) both breaking out of year and a half bases. This is a very bullish sign for a rally continuation. (Note that volume on JJM is extremely low (only about 4k/day) compared with that of DBB (around 180k/day).)
2. While base metals shine, precious metals continue to lose their luster. Leading the pack to the downside are the gold miners. Both the Gold Miner etf (GDX, $24.19) and the Junior Gold Miner etf (GDXJ, $37.26) have broken support levels and seem determined to test their next support levels which are $22 for GDX and $33 for GDXJ.
3. Not only is Oil (OIL, USO) continuing to break support levels, but so are Oil Services (OIH, XES) with many individual drillers sliding to new yearly lows (RIG, FI, KEG, DRQ).
4. Scotland's threat to secede from the UK sent the British Pound (FXB) and the Euro (FXE) plummeting and the US Dollar (UUP) soaring. Several weeks ago we noted the breakout in the UUP along with the breakdown in the FXE and suggested it as a viable long/short pairs trade. Currency traders who initiated this trade at the time are probably dancing around the Maypole.
Today's stock highlights: "Old tech" breaking out
Yahoo! (YHOO, $41.81) shareholders are shouting for joy as the stock rallied 5.6% on five times normal volume to a high not seen since 2000. The reason is because the company stands to gain around $8.8B (before taxes) in cold hard cash on the heels of the Alibaba (proposed symbol: BABA) IPO. It remains to be seen, however, if the company can put all that cash to good use...
Two other bright spots in the "old tech" space: Microsoft (MSFT, $46.47) and Nokia (NOK, $8.49) both broke out to new highs on heavier than normal volume today. Mr. Softie was recommended as a long pick to our *Blue Plate Specials* subscribers on 3/31/14 at $40.99. Since then, it's rallied over 13%.