BOND YIELDS RISE AS MONEY LEAVES BONDS FOR STOCKS -- BANK SPDR IS BACK ABOVE ITS 200-DAY LINE -- ETRADE IS A FINANCIAL LEADER -- UPS HELPS PULL TRANSPORTS ABOVE 50-DAY AVERAGE -- S&P 500 CLEARS 20-DAY LINE AS MARKET BOUNCES
BOND YIELDS SURGE ON CONSUMER SPENDING... Today's jump in bond yields is being attributed to gains in consumer spending. Chart 1 shows the 10-Year Treasury Note Yield ($TNX) climbing above its 50-day average to the highest level in a month. When yields rise, bond prices fall. Chart 2 shows the 20+Year Treasury Bond iShares (TLT) falling to the lowest level since July. Money coming out of bonds is going into stocks today. All stock sectors are up, including financials. As I explained last week, banks and life insurers are two groups that benefit from rising bond yields. And they're leading the financial sector higher today.
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Chart 1
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Chart 2
REGIONAL BANK SPDR CLEARS 200-DAY LINE -- SO DOES E*TRADE... Chart 3 shows the KBW Regional Banking SPDR (KRE) trading back above its 200-day average. That's a sign of relative strength -- as is the rising KRE/SPX ratio above the chart. Brokers are also having a strong day. Chart 4 shows ETrade Financial Corp. (ETFC) climbing above its 200-day line as well. Its relative strength line (top of chart) is also rising. Insurers are also having a strong day.
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Chart 3
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Chart 4
UPS LEADS TRANSPORTS HIGHER... Chart 5 shows United Parcel Service (UPS) jumping more than 3% today, making it the day's top percentage gainer in the industrial sector and the transports. Its relative strength line (top of chart) has been climbing since July. That's helping the Dow Transports which are back above their 50-day line as well (Chart 6). The transports are showing relative strength for the first time this year.
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Chart 5
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Chart 6
S&P 500 CLEARS 20-DAY AVERAGE... Stocks are having a strong day with gains in excess of 1%. Chart 7 shows the S&P 500 trading above its 20-day average (green line) for the first time in a month. The hourly bars in Chart 8 show the SPX nearing a test of overhead resistance ranging from 1988 to 1993. Its needs a close above both barriers to turn its short-term trend higher. That would still leave it well below its 50-day and 200-day averages.
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Chart 7
