TEN-YEAR TREASURY YIELD KEEPS CLIMBING -- THAT PUSHES BOND PRICES FURTHER BELOW RESISTANCE -- THAT'S LIFTING FINANCIALS AND BANKS IN PARTICULAR -- BANK LEADERS ARE BANK OF AMERICA, JP MORGAN, AND SUNTRUST -- NORTHERN TRUST NEARS UPSIDE BREAKOUT
TEN-YEAR TREASURY YIELD CLEARS 50-DAY AVERAGE AS BOND PRICES DROP... The upturn in Treasury yields that started on Friday is gaining more momentum today. Chart 1 shows the 10-Year Treasury yield ($TNX) climbing 5 basis points to the highest level in more than a month. It's also climbed back over its 50-day moving average. Chart 1 also shows the TNX remaining well above a support line drawn under its April/May lows. Rising bond yields are pushing bond prices lower. Chart 2 shows the 7-10 Year Treasury Bond iShares (IEF) falling further below overhead resistance along their spring highs and 200-day average. The IEF is headed down for a test of its 50-day line. Chart 2 has the look of a bond rally failure. As usually happens, rising bond yields (and falling bond prices) are giving a boost to financial stocks, and banks in particular.
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Chart 1
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Chart 2
BIG BANKS LEAD FINANCIAL SECTOR HIGHER ... Thanks largely to rising bond yields, financial stocks are the day's strongest sector. Chart 3 shows the Financial Sector SPDR (XLF) trading above its 200-day moving average and, more importantly, challenging a falling trendline drawn over its January/March highs. Its relative strength ratio (upper box) is rising as well. Banks are leading the XLF higher. Chart 4 shows S&P Bank SPDR (KBE) climbing back over its 50-day average today as it also trades at a new high for the month. Its relative strength ratio is also rising. The KBE recently bounced off the lower end of a six-month consolidation pattern within its major uptrend, and its 200-day moving. The two converging trendlines surrounding the sideways pattern could also qualify as a bullish symmetrical triangle. That's a logical spot for banks to start rising again. Three of the biggest banks in the KBE are leading it higher today. See the next paragraph to find out which three.
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Chart 3
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Chart 4
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Chart 5
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Chart 6
BANK OF AMERICA, JP MORGAN, AND SUNTRUST ARE BANK LEADERS... Chart 5 (above) shows Bank of America (BAC) rallying to the highest level in two months after having already cleared its falling trendline a week ago. It's also one of the biggest banks in the KBE. The same is true of our next bank leader. Chart 6 (above) shows JP Morgan Chase (JPM) in an even stronger technical position. It's very close to challenging its May high. One of the regional banks also deserves mention. Chart 7 (below) shows Suntrust Banks (STI) surging more than 2% today and on track to challenge its March high. That regional bank leader is also one of the bigger bank holdings in the KBE. There's one other financial stock leader that deserves mention.
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Chart 7
NORTHERN TRUST NEARS UPSIDE BREAKOUT ... Chart 8 shows Northern Trust Corp. (NTRS) also rallying sharply today, and on the verge of an upside breakout to a new record. This financial stock is part of the asset manager group which is also helping lead the financial rally. And it's showing up on the financial leader board and has a strong chart. Although we're focusing mainly on banks today (because they're usually the biggest beneficiaries of rising bond yields), life insurance companies are also benefiting from rising rates and are today's second strongest financial group. By contrast, stock groups that usually get hurt by rising rates are all trading lower today. They include dividend paying consumer staples, utilities, and REITS.
