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HIKE IN AUSSIE RATES GIVES BIG BOOST TO GLOBAL STOCKS AND COMMODITIES

October 7th, 2009 Leave a comment Go to comments

HIKE IN AUSSIE RATES GIVES BIG BOOST TO GLOBAL STOCKS AND COMMODITIES — GOLD HITS RECORD HIGH — COAL STOCKS HELP LEAD ENERGY RALLY

AUSSIE DOLLAR HITS 52-WEEK HIGH … The Australian central bank lifted its short-term interest rate 25 basis points to 3.25% from the lowest level in nearly half a century. It was the first G-20 country to do so. Global stocks and commodities rallied sharply on the view that the hike in rates was a sign that the global economies were out of danger. While all major foreign currencies rose against the U.S. dollar on the news, theAussie dollar saw the biggest jump. Chart 1 shows the XAD hitting the highest level in more than a year. Interestingly, the Canadian Dollar did the same (Chart 2). That makes sense since both are linked to commodities. When the U.S. dollar is falling, and commodities rising, currencies of natural resource producers get a double boost. Another commodity/currency market –gold– is soaring to a new record high today and most other commodites are rising. Energy and basic materials are the day’s two strongest stock groups.

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Chart 1

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Chart 2

COAL STOCKS LEAD ENERGY RALLY… Yesterday’s message showed a number of gold and silver stocks that were bouncing off support levels. All are rallying sharply today. I also showed some natural gas leaders that are having very good chart day on rising energy prices. I mentioned that coal stocks were rallying along with the rest of the energy complex. That’s the case again today. On September 22, I showed three coal stocks that had bullish chart patterns. Two of them are among the top five percentage gainers in the energy complex. Chart 3 shows Consolidated Energy bouncing off chart support along its June high. Chart 4 shows Peabody Energy gapping higher today (a bullish article in Barrons this past weekend may also be helping). Two other coal leaders having a strong day are Arch Coal (Chart 5) and Massey Energy (Chart 6). All four have rising relative strength lines.

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Chart 3

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Chart 4

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Chart 5

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Chart 6

COAL IS STRONGEST ENERGY GROUP … The fact that coal stocks are helping lead the energy sector higher makes more sense after looking at the performance lines in Chart 7. They measure coal, oil service, and natural gas stocks against the Energy SPDR (XLE) which is the flat black line. The chart shows the Market Vectors Coal ETF (KOL) to be this year’s strongest energy group. A distant second and third are oil service and natural gas stocks.

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Chart 7

[John Murphy]

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