STOCKS LOSE SOME UPSIDE MOMENTUM --AMAZON AND MCDONALDS PULL CYCLICALS LOWER -- INDUSTRIALS CONTINUE TO RALLY -- LED BY FEDEX, HARRIS CORP, AND PACCAR -- TEN-YEAR YIELD TESTS 3% AGAIN
SHORT-TERM SIGNS OF WEAKNESS ... The uptrend in U.S. stocks remains very much intact. However, upside momentum is weakening a bit. Chart 1, for example, shows the S&P 500 trading sideways over the past couple of weeks which is not unusual. The daily MACD lines (which are overlaid over the price chart), however, have weakened a bit. The SPX, however, remains well above its early September low and its 50-day moving average. Chart 2, however, shows the Nasdaq Composite Index in a slightly weaker condition. Its daily MACD lines have also turned negative. And its 9-day RSI line (top of chart) has dropped below 50. That shows some loss of upside momentum. The COMPQ is also much closer to it September low and its 50-day line. Those support levels may be tested. Some selling is showing up in cyclical stocks.
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Chart 1
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Chart 2
AMAZON AND MCDONALDS LEAD CYCLICALS LOWER ... Chart 3 shows the Consumer Discretionary SPDR (XLY) backing off today, but remaining well above initial support levels. Its RSI and MACD lines on top of Chart 3, however, show some loss of momentum. Chart 4 shows McDonalds (MCD) falling below its moving average lines today. More importantly, Chart 5 shows Amazon.com (AMZN) slipping to a new low for the month and nearing a test of its 50-day moving average. AMZN is the biggest stock in the XLY and accounts for a quarter of its weight.
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Chart 3
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Chart 4
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Chart 5
INDUSTRIALS ARE HOLDING UP BETTER ... Industrial stocks continue to gain ground. Chart 6 shows the Industrial Sector SPDR (XLI) trading at an eight-month high and continuing to show market leadership. That can be seen by the XLI/SPX relative strength ratio (solid line) which turned up a month ago and has risen to the highest level since June. Chart 7 shows FedEx (FDX) rising to a three-month high. Chart 8 shows Harris Corp (HRS) nearing its high for the year. Chart 9 shows PACCAR (PCAR) reaching a six-month high. Other recent leaders include Boeing,, Caterpillar, and Deere.
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Chart 6
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Chart 7
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Chart 8
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Chart 9
TEN-YEAR TREASURY YIELD IS TESING 3% AGAIN ... Chart 10 shows the 10-Year Treasury Yield ($TNX) retesting overhead resistance near 3%. That's an important test for the bond market. An upside breakout would signal higher bond yields and lower bond prices. And it could have an impact on various market sectors. Higher bond yields usually benefit financial stocks while hurting dividend-payers. An upside breakout in bond yields might also cause some nervous selling by stock holders.
