We've got a sector/industry to highlight today as usual, but first, a correction. Last week we mentioned the water utility industry didn't have a fund or ETF to use as a proxy. However, we forgot about the PowerShares Water Resources (PHO) exchange-traded fund. It's only been around since late 2005, and volume is still a tad thin. However, it would pretty well mimic the Dow Jones Water Index (DJUSWU) we used in our analysis. A 'thanks' goes out to a couple of our readers who reminded us of the ETF.

Automobile Makers - Back Again

This idea just won't go away -- nor should it, based on its results. We first went bullish on the Dow Jones Automobile Index (DJUSAU) back in July of last year, when it was trading at 155.87. The move to 212 meant a 35.8% gain for those lucky folks who were listening at the time. But if you weren't, you may be interested to know we see the same kind of potential in the works again.

The last few months have been a wild ride for sure -- a 46.2% rally from 2006's low to its high, then a 14.0% dip from that 2006 peak over the next four weeks. Since then, the car-makers have regained 13.7%, which brings us to today.

You don't have to look far to find reasons to avoid the big auto makers - nobody seems to like them, in the shadow of record-breaking losses for some of the biggest names in the industry. Yet, the recent chart is a clear reminder that a company doesn't have to be profitable right now for a trader to make money on its stock right now. The fact that the Dow Jones Automobile Index is working its way higher should be evidence of that.

In fact, we have two bullish momentum-based buy signals in place. The first is a MACD crossover on the weekly chart (we actually saw it last week). The last one occurred right as the index was coming out of as major bottom - and entering a major bullish period - in the middle of 2006. And for the most part, MACD signals on this weekly chart have been pretty fruitful. So, we're heeding this one for sure.

The second buy signal is the recent cross back above the 50-day moving average line (purple), which has also been a high-quality sign for this chart. Although a little more ambiguous, to see this cross occur as the index as well as the 50-day line are both above the 200-day moving average means just a little more.

Dow Jones Automobile Index (DJUSAU) - Weekly


By the way, the 200-day average (green) is pointed upward for the first time since 2004, another subtle bullish hint. The bullish volume (accumulation) has also been strengthening, which makes us wonder if anybody is actually following their own avoid advice.

In any case, let's set a new target of 238. A move to that level would roughly mirror the size of run made in 2006. As you may suspect, we're using the 50-day line (currently at 196) as a stop in this bullish bias.

Price Headley is the founder and chief analyst of BigTrends.com.