BOND YIELDS MAY BE TURNING BACK UP AGAIN -- THAT'S BOOSTING FINANCIALS AND HURTING UTILITIES -- JP MORGAN AND GOLDMAN SACHS CLEAR 50-DAY AVERAGES -- BOEING AND INTEL LEAD DOW HIGHER
TEN YEAR BOND YIELD MAY BE TURNING BACK UP AGAIN... After hitting a four-year high during January, the 10-Year Treasury Yield saw a modest decline from mid-February until the end of March. Some of that decline in yields was probably based on safe haven buying of Treasuries during the first quarter stock market correction. With stocks rebounding, it looks like bond yields may be doing the same. The daily bars in Chart 1 show the $TNX forming a pattern of higher lows during April and nearing the highest level since March. Its 9-day RSI line (top box) is climbing back above 50 (and breaking a falling trendline) after dropping to oversold territory at 30 at the end of March. Daily MACD lines (and MACD histogram bars) are turning positive for the first time in nearly two months (bottom circle). That may be partially due to today's rebound in stock prices and selling of Treasuries. This week's strong CPI and PPI inflation reports may also be boosting bond yields. Rising bond yields would be consistent with a stronger stock market. That also explains why financial stocks are the day's strongest sector (while utilities are the weakest).
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Chart 1
FINANCIAL SPDR NEARS TEST OF RESISTANCE... Financial stocks usually do better when bond yields are rising. And they're doing that today. Chart 2 shows the Financial SPDR (XLF) nearing the highest price level in a month. And that's after finding chart support at its February low and its 200-day moving average. That would put it in position to challenge its 50-day average (blue arrow). Its relative strength ratio (top box) is also rising for the first time in a couple of months. The direction of the RS line pretty closely matches the recent direction of the 10-Year Treasury yield. The lower box shows its MACD histogram bars turning positive for the first time in a month. The pattern of "rising lows" in the histogram bars is also supportive of higher prices.
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Chart 2
JP MORGAN CHASE AND GOLDMAN SACHS CLEAR 50-DAY LINES... One of the simplest ways to find which individual stocks are leading a sector rally is to look for first ones to exceed their 50-day average. And two of the biggest bank stocks are doing that today. Chart 3 shows JP Morgan Chase (JPM) rising back above its 50-day moving average to the highest level in three weeks. Chart 4 shows Goldman Sachs (GS) finishing the day fractionally above its 50-day average as well.
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Chart 3
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Chart 4
BOEING AND INTEL LEAD DOW HIGHER ... Last Thursday's message pointed out that the rebound in Boeing (BA) had made the Dow that day's biggest percentage gainer. The same is true again today. While all major stock indexes had a strong day today, Boeing's gain of 3% helped make the Dow the day's biggest percentage gainer (1.2%). It had the biggest influence on the Dow since it's the most expensive stock in the price-weighted Dow Average. The daily bars in Chart 5 show BA nearing a challenge of its 50-day average and a new high for the month. Chances for that happening are supported by its MACD histogram bars (below chart) turning positive by the biggest margin since January. The biggest Dow percentage gainer was Intel (INTC). Chart 6 shows that tech stock gaining 3.1% and nearing a record high (helping make semiconductors the tech sector's biggest percentage gainer). Goldman Sachs and JP Morgan Chase were also Dow leaders. The Dow and S&P 500 ended the day near their April highs.
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Chart 5
