Rotation Report: Upside Crash

Over the last few months we've seen some unprecedented action as the market rips higher with ease.  The instability is unanimous across the world in currency, commodity and bond markets.  Odds are there are credit market issues underneath the surface.  Naturally, troubled nations and businesses want to hide their problems as long as they possibly can, so we may be stuck in this environment for awhile.

The market rotation story is still largely the same.  Defensive, bond-like groups show continued leadership and biotechs are still the leading group. The biggest changes are the emergence of the home-building group and the precious metal space.  Let's take a look.

Last week I mentioned this potential breakout in REIT relative strength.  There's no doubting this one!

The yield chase is on as in a big way as long term treasuries TLT and muni bonds PZA have broken out of 3 month cup with handle bases.

Gold and the precious metals group are really starting to shape up and trade well.  It leads me to think the dollar could be near a reversal.  I shared some thoughts on gold at See It Market.

Just when you think they're dead homebuilders bust loose with price and relative strength breakouts.

We're seeing the same action in the Building Materials.  There are some real nice larger bottom bases in this whole home-building space in things like TOL,USG,MHO,OC and CSTE.  Even if you're the grizzliest bear, I don't know how you don't have some sort of exposure to this group if we see continued upside from these levels.

Biotech relative strength hit new highs as soon as the market revered.  That was a huge clue mid-week before some of the great rips in the group.

Indicators on watch

The NYSE Advance Decline line remains very strong, but now the stock only breadth and volume are really tailing off.

The stock to bond ratios are slipping, but holding on to support for now.

Quickly and quietly the consumer ratio has fallen to key support.  Is it another caution sign in the making?

Moving Overseas...

Asia is in the spotlight this week

China ETF FXI relative to SPY is at a key dual resistance level.

The Shanghai Composite printed a shooting star.  It's been a straight line rally and rest is welcomed.

The Philippines Composite is really standing out versus other emerging markets.  It's attempting to leave a beautiful four month consolidation.  EPHE is the Philippines ETF.

Noteworthy Nuggets

The Australian Dollar ETF FXA staged a strong reversal week.  Is this an early sign for the commodity complex?

In the ag commodity space Sugar (SGG) and (JO) had a strong reversal weeks at key supports.

Financials relative strength is tanking, further confirming the action in falling bond yields.

The Gambling Index BJK continues to find buyers at the 200 week moving average

The Travel and Tourism Index is trading horribly.  It's made up of things like Priceline, Expedia etc.  If the weakness persists it could affect other groups like airlines and hotels.

Thanks for reading!