TEN-YEAR TREASURY YIELD EXCEEDS 3% -- 20-YEAR T-BOND ISHARES BREAK SUPPORT -- THE DOW NEARS ITS JANUARY HIGH -- BOEING AND CATERPILLAR CLEAR RESISTANCE -- QQQ HOLDS 50-DAY LINE -- SEMICONDUCTORS CONTINUE TO STABILIZE ABOVE 200-DAY AVERAGE
TEN-YEAR TREASURY YIELD REACHES FOUR-MONTH HIGH ... Chart 1 shows the 10-Year Treasury Yield ($TNX) rising above its twin summer peaks near 3.00% and reaching the highest level in four months. That upside move breaks the TNX out of the three-month sideways pattern that it had been trading in; and may be setting the stage for a retest of its May peak. That would be a very important test. The second chart shows why. The monthly bars in Chart 2 show that the May 2018 peak in the 10-year yield represented a retest of its late 2013 peak around the same level. From a long-term perspective, that'a a very important test. Because a decisive close above this May's peak would put the TNX at the highest level since 2011. It would also constitute a major bullish breakout on its long-term chart which would signal higher bond yields. The immediate impact of higher bond yields is falling bond prices.
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Chart 1
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Chart 2
BOND PRICES ARE DROPPING ... Bond prices always drop when yields are rising. Chart 3 shows the 20+Year Treasury Bond iShares (TLT) falling below its late-July bottom to the lowest level in four months. Chart 4 shows the 7-10 Year Treasury Bond iShares (IEF) nearing a test of its summer low. Both bond ETFs have been forming major tops for some time. Today's upside breakout in bond yields may accelerate that topping process in bond prices. So far, today's upside breakout in bond yields is having a minimal effect on stock prices. Financial stocks are getting a minor boost, while dividend paying stocks like staples, utilities, and REITs are modestly lower. Stocks in general are having a strong day.
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Chart 3
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Chart 4
THE DOW CONTINUES TO LEAD -- BOEING AND CATERPILLAR GAIN... Chart 5 shows the Dow Industrials trading at the highest level in nearly eight months, and approaching a test of its January high. Chart 6 shows Boeing (BA) rising above its July peak to turn its trend higher. Because of its high price, Boeing has the biggest impact on the direction of the Dow. Chart 7 shows Caterpillar (CAT) rising above its 200-day average (red line) for the first time in three months. Three other Dow leaders today are Intel, Nike, and United Technologies. The last two are trading at record highs.
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Chart 5
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Chart 6
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Chart 7
NASDAQ 100 HOLDS 50-DAY LINE... The Nasdaq market is having a bounce-back day as well. Chart 8 shows the Invesco Nasdaq 100 (QQQ) bouncing off its 50-day average today to keep its uptrend intact. The Nasdaq is being supported by rising biotech and technology stocks. Some of today's biggest percentage gainers include Micron Technology, Netflix, Broadcom, and Qualcomm. Some bigger stocks like Amazon, Apple, and Microsoft are also gaining ground. Semiconductors are also having a strong day. Chart 9 shows the PHLX Semiconductor iShares (SOXX) holding above its 50-day average after surviving a test of its 200-day line last week. That's an encouraging sign for semiconductors and the tech sector in general. Most stock sectors are rising today led by cyclicals, technology, industrials, and energy.
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Chart 8
