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Tuesday Wrap-Up: Market Rallies On Strong Commodities!

|Includes: BTU, CNX, DO, Freeport-McMoRan Inc. (FCX), FSLR, INFY, LVS, RIG, RIO, RTI, SLB

The market opened the week on a strong note, with commodity sectors leading the rally.  I have been stressing the importance of the commodity sectors in keeping the stock market going higher.  Just last weekend, I said, "Commodity sectors remain the key for this market."  Many people think that since the market tumbled on problems in the financial companies, financials need to lead this market in every rally.  While the financials are still very important and they sure helped to signal the bottom; but, as the economy recovers, we'll need to see the businesses that make the "building blocks" to lead the market higher.  The building blocks are the materials, the energies, the machineries...etc.  In addition, in this technical age, the technology companies also provide the "building blocks". 

Financials need to stablize, and, they have.  But, they do not need to lead the market.  Most financials stocks are already lagging the broader market.  As you can see in the chart below, XLF (financials ETF) is behind SPX (SP 500) since the market started to recover:

If you are looking at sectors for indication as to where the market is heading, pay more attention to the commodity sectors and the techs.  Today, gold briefly tested the $1000 level and quickly saw some profit-taking.  Crude oil went above $70/barrel again, while the dollar fell further.  Miners were very strong: FCX +3.03%, RTP +4.81%, CNX +4,18%, BTU +6.01%, RTI +7.43%.  Oil services also recorded solid gains: RIG +4.17%, DO +3.53%, SLB +3.99% 

We did a quick trade on RTI and locked in intraday profits of +31% at the day high:
September 08, 2009
10:24 | HappyTrading RTI ($22.20) Sold to Close RTIJD Oct 20 calls, at $3.20 +31%
08:29 | HappyTrading RTI ($21.90) Sold to Close RTIJD Oct 20 calls, at $3.00 +22%
07:25 | HappyTrading RTI ($21.15) Bought to Open RTIJD Oct 20 calls, at $2.45

We also took some more profits on INFY and LVS.  The INFY position was started last week, and, we've had the LVS trade since August 13:
12:49 | HappyTrading INFY ($45.90) Sold to Close IUNJV Oct 43 calls, at $4.50 +29%
08:19 | HappyTrading LVS ($16.35) Sold to Close LJJIV Sep 13 calls, at $3.90 +123%

The Dow closed up +56.07 points; SPX added +8.99 points; Nasdaq gained +18.99 points:

USO (oil) was up +5.15% and UNG (natural gas) jumped +7.76%.  XME (metals and mining) gained +4.06%.  OIH (oil services) rose +3.19%.  SOXX (semiconductors) led the techs with a +2.25% advance.  FXI (Chinese ADRs) added +2.99%.

SPX

SPX added +8.99 points to close at 1025.39.  It also closed above its daily MAs.  The MACD flattened.

Nasdaq

Nasdaq gained +18.99 points to close at 2037.77.  Its daily MAs and MACD went higher.

Both SPX and Nasdaq closed above their respective daily MAs.  Nasdaq is a bit stronger with MACD already turning up.  VIX stayed above 25 and still appears dangerous.  The market has rallied for 4 straight days, and might need to take a breather.  We might see some profit-taking tomorrow; we'll let the commodity sectors point the way.  Solar stocks rallied on the news that FSLR will be building the biggest solar field on the planet for China!  FSLR shares popped +10.65% today.  After being weak for months, we may finally see some buyers coming back into the solars.

Good night and HappyTrading! ™