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Commodity Sectors Lead The Market Higher

|Includes:AGU, BUCY, CAT, CF, CNX, FCX, JOY, MEE, Potash Corporation of Saskatchewan Inc. (POT), X

Last night, China reported a soft CPI number, easing the fear of inflation.  This morning, US jobless claims fell.  In addition, favorable news regarding support for Greece's debt crisis came out of Europe, although it is still unclear what actions will be taken coming out of the EU meeting.  These were enough to turned a weak opening into a market rally.  This morning, in our Trading Room, I commented:

February 11, 2010 8:02 AM
feels like it wants to rally...

You can see clearly from SPX's intraday chart below what happened next:
SPX (Intraday 5-minute chart)

The market rally fast as buyers came in.  What happened in the first 30-minutes of trading was that the market tested SPX 1060.  Buyers came in and the supported SPX 1060.  SPX went all the way up to near 1070 and came back down again.  But, it would not go below 1064.  From the price actions of most stocks, you can see that big buyers were starting to come in. 

20-minutes later, big names such as AAPL also started to move, and the rally gained momentum:
February 11, 2010 8:24 AM

turning into rallying mode... delayed reaction from this morning's news?

Commodity sectors were very strong.  Agriculture and farm machinery stocks mentioned in my article on Tuesday were among the biggest gainers again:  POT +5.01%, CF +2.91%, AGU +3.03%, CAT +5.64%, JOYG +4.79%, BUCY +5.78%.  Miners continued from where they left off on Tuesday:  FCX +4.42%, X +5.95%, CNX +5.87%, MEE +7.07%.

The Dow was up +105.81 points; SPX added +10.34 points; Nasdaq gained +29.54 points:

XME (metals and mining) led the market with a +4.03% gain.  GDX (gold miners) added +3.87%.  MOO (agriculture) garnered +2.46%.  PBW (clean energy) bounced +2.25%.  XLF (financials) was barely green.  FXI (Chinese ADRs) scored a +2.72% win.


SPX added +10.34 points to close at 1078.47.  It closed above its 10-day MA.  The MACD turned higher.


Nasdaq gained +29.54 points to close at 2177.41, above the 2150 level.  It also closed above its 10-day MA.  Its MACD moved up.

Both SPX and Nasdaq closed above their respective 10-day MAs.  While Nasdaq also cleared above its resistance level at 2150, SPX is still struggling with its at 1080.  VIX closed just below 24.  Financials still were unable to find much buying momentum.  As discussed this weekend in my Market Forecast, my opinion is that the dollar is short-term overbought and needs to take a breather.  As the dollar pulls back, investors will rush back into the oversold stocks, especially in the commodity sectors.  The question mark lies in the financial sector, which has been very weak.  As I said on Tuesday, we'll still need to see more strength in the financials to help push SPX above 1080.  If the market does get above SPX 1080, I think this rally has a few more days to run.

Also mentioned in my Sector Watch this weekend were the biotechs.  BTK (biotech index) had made a new all-time high just last week, but, did a quick pullback as the market sold off.  This may have created some buying opportunities for those who missed the 3-day run-up.  Biotechs were muted today as buying focus was on the commodity stocks.  If this rally does continue, it might be a good idea to look at some recent leaders in the biotech sector.

Good night and HappyTrading! ™

Disclosure: positions: none