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Commodity Stocks Lead As These 3 Leaders Break Out; Dow Jones Makes This Critical Move

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The S&P 500 undercut its 200-day moving average for the first time in nearly four weeks. But it battled back near the break-even level. Apple is holding firm, and Big Data play Tableau Software broke out. Commodity stocks helped lead the upside. (Gorodenkoff/Shutterstock)

The major indexes enjoyed a slow yet steady afternoon rebound but still closed mildly lower on Thursday. Some commodity stocks and cyclical plays paced the upside, including ship transport, logistics, coal and homebuilding. Preliminary volume figures were mixed as traders fret over how the U.S. and China will handle two-day talks on trade.

Inside the IBD 50, small-cap energy play Warrior Met Coal (HCC) gapped up at the open. At one point the energy play rallied to an all-time high of 26.93, briefly surpassing a 26.53 buy point within a nearly nine-week cup without handle.

Meanwhile, as Apple (AAPL) tiptoed closer to a potential new breakout, an emerging group of new leaders powered past their own buy points and sharply outperformed the market. They included Marathon Oil (MRO) (up 6% in double average volume) and Tableau Software (DATA) (up nearly 7% in more than four times usual turnover).

The Dow Jones industrial average eked out a tiny gain of 5 points as it notched a positive reversal. Dow components Boeing (BA) and 3M (MMM) were the only two out of 30 names to rise 1 point or more.

Ninety minutes into Thursday's session, the blue chip index slid as much as 1.6% before slowly climbing higher the rest of the way.

The Dow industrials poked below its long-term 200-day moving average for the second time since April 2. That's evidence of a new shakeout taking place.

At 23,930, the Dow industrials still stands nearly 10% off its peak, despite the fact that IBD's current outlook for the market holds at "Uptrend under pressure."

The S&P 500 also slid below the long-term 200-day moving average but turned a loss of more than 1.4% to just a 0.2% dip, another bullish sign. Still, watch to see if the large-cap benchmark tries in future trading sessions to mark another close below the 200-day line.

A Floor Of Support At 7000?

The Nasdaq composite was off less than 0.2% after having fallen as much as 1.5%. The premier index of growth companies continues to test buying support near the 7000 level.

Volume ran sharply higher on the Nasdaq vs. the same time Wednesday and slipped lower on the NYSE, according to early data.

The Russell 2000 and the Dow transports both fell 0.5%. The Russell 1000, a popular small-cap gauge, is clinging to a tiny year-to-date gain.

Marathon Oil rallied more than 6% at one point and got as high as 19.51 before cooling off some. The stock easily surpassed an 18.76 buy point in a 13-week cup with handle. The 5% buy zone extends up to 19.70.

Marathon is an integrated oil and gas firm. The large-cap firm from Houston posted earnings of 18 cents a share in Q1, reversing a 13-cent net loss in the year-ago quarter. Sales boomed 62% to $1.73 billion.

More Energy Leaders Emerging

Marathon is not the only company with strong relative performance and good IBD ratings, as seen in IBD's stock quotes and in the Stock Checkup tool. Ecopetrol (EC), Royal Dutch Shell (RDSA) and Italy's Eni Spa (E) all hold a Relative Price Strength Rating of 80 or higher.

While oil and gas explorers slumped, integrated firms such as Marathon Oil advanced smartly as the rally in crude oil futures show no signs of abating. U.S. WTI near-term futures bounced from a nearly 0.7% loss to finish up and well above $68 a barrel.

WTI crude is now up more than 13% year to date. In contrast, the S&P 500, at 2627, is down nearly 1.7% since Jan. 1. The 500 ran up 19.4% in 2017.

Tableau, meanwhile, gapped out of a base-on-base pattern at 87.70, rising more than 7% to 91.30 in quadruple normal volume.

Tableau is a Big Data analytics software expert. The Seattle-based firm notched its fourth quarter in a row of solid earnings per share. Revenue climbed 23% to $246.2 million, the biggest jump in five quarters.

According to IBD Stock Checkup, Tableau's so-so 68 Composite Rating belies a strong 89 RS Rating, meaning the company is outperforming 89% of all publicly traded firms in IBD's database over the past 12 months. Given Thursday's strong advance, watch to see if Tableau's ratings edge higher.

What's Next For Apple?

Going back to Apple, the iPhone, iPad and digital services titan acted stingy in giving back Wednesday's strong gain, a good sign for the bulls. The stock initially fell more than 1% to 174.63 in brisk trade. Then it wiped out those modest losses to end 0.2% higher to 176.89.

The megacap tech is possibly forming the right side of a shallow seven-week double-bottom base. The middle peak between the base's  two lows is 178.94. Hence, a new buy point would be 179.04, 10 cents above that middle peak. The decline within the base is very light at 12.5%.

Apple is still trading near all-time highs, another bullish sign. At $897 billion, it's the largest company by market value on the U.S. financial markets. In IBD Stock Checkup, the Cupertino, Calif., firm shows decent ratings such as an 85 for EPS (Earnings Per Share) and 86 for Relative Price Strength.

Earlier this week the iPhone giant reported a 30% jump in fiscal second-quarter earnings to $2.73 a share, the biggest jump in 10 quarters, as revenue grew 16%, marking a sixth quarter in a row of top-line acceleration.

Apple's revenue slumped 9% during the fiscal fourth quarter of FY 2016, then rose 3%, 5%, 7%, 12% and 13% in the next five quarters.

The Street expects Apple's earnings turnaround to keep shining brightly. Analysts surveyed by Thomson Reuters expect profit to climb 30% in the June-ending fiscal third quarter to $2.17 a share.

The U.S.-China Showdown

Despite the nifty reversal by the major indexes, investors also seem to show nervousness on the outcome of two-day trade talks between top U.S. and Chinese economic officials in Beijing.

Treasury Secretary Steven Mnuchin, Commerce Secretary Wilbur Ross, and other key players arrived in the Middle Kingdom on Thursday for talks later in the day and Friday.

Bloomberg reported a senior Chinese government official as saying that China will refuse any U.S. preconditions for negotiations, such as narrowing the bilateral trade gap.

Will Bank Stocks End Their Slump?

On Friday, a number of top Federal Reserve officials and regional bank presidents are slated to speak, including William Dudley, John Williams, and Esther George. On Wednesday, the U.S. central bank kept short-term interest rates unchanged. The fed funds rate that's charged on overnight cash infusions to major lenders currently hovers at a 1.5%-1.75% target range.

CME futures see a nearly 45% probability that the Fed will raise the fed funds rate three more times to a target range of 2.25%-2.5%, slightly down from recent days. Numerous money center banks, Wall Street investment giants and regional lenders have recently been hit with intense selling.

Citigroup (C), Morgan Stanley (MS), Goldman Sachs (GS) and Bank of America (BAC) have either sliced below or came close to touching their 200-day moving averages. But some fast-growing banks, such as Western Alliance Bancorp (WAL) and SVB Financial (SIVB), have been holding up much more firmly.

(Please follow Saito-Chung on Twitter at @IBD_DChung for more commentary on leading stocks, breakouts, sell signals, and financial markets.)

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