BANKS LEAD FINANCIALS AND THE MARKET HIGHER -- FINANCIAL SPDR HITS NEW 2019 HIGH -- WHILE S&P BANK ISHARES CLEAR THEIR 200-DAY LINE -- BANK LEADERS INCLUDE JPM, BAC, AND PNC -- S&P 500 NEARS TEST OF LAST SEPTEMBER HIGH

BANKS LEAD FINANCIALS HIGHER ... Strong earnings from three banks this morning have helped push that group sharply higher; and they're leading the financial sector and the market higher. Chart 1 shows the Financial Sector SPDR (XLF) gapping up to the highest level of the year (after regaining its 200-day average last week). The solid gray line is a ratio of the XLF divided by the S&P 500 and shows financials starting to show market leadership for the first time this year. Banks, which have been one of the weakest parts of the financial sector, are leading it higher today. Chart 2 shows the S&P Bank SPDR (KBE) trading above its 200-day average for the first time in a month. Its relative strength ratio (gray line) is also rebounding. A jump in Treasury yields today may also be supporting the bank rally. A number of individual banks are also clearing their 200-day lines.

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Chart 1

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Chart 2

JPM, BAC, CITIGROUP, AND PNC LEAD BANK RALLY ... J.P. Morgan (JPM) is the biggest percentage gainer in the XLF today. Chart 3 shows the bank leader surging to the highest level since early December. Chart 4 shows Bank of America (BAC) close to doing the same. Citigroup (not shown) is also trading at the highest level of the year. Chart 5 shows PNC Financial climbing above its 200-day line in decisive fashion. Today's unusually strong showing in economically-sensitive bank stocks (and financials in general) is giving a big boost the stock market which is hitting new highs for the year.

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Chart 3

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Chart 4

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Chart 5

S&P 500 NEARS 2018 HIGH... Chart 6 shows the S&P 500 drawing closer to its record high of 2940 which was reached at the end of last September. That will be another important technical test for this year's uptrend. Ten of the market's sectors are in the black today, with the biggest gains in financials, industrials, cyclicals, materials, and energy. The two losers are bond proxies utilities and REITS. They're weakening along with bond prices. A weaker dollar is boosting commodity prices like oil and copper (Chart 7). Copper producer Freeport McMoran (FCX) is leading the day's gains in materials. Foreign stocks are also gaining ground. China and South Korea are leading EM Asian stocks higher. While German stocks are leading the eurozone.

STRONGER FOREIGN CURRENCIES BOOST STOCK ETFS: Chart 8 shows Germany iShares (EWG) trading above their 200-day average (red line) for the first time this year. The EWG is getting an added boost from a bouncing euro. The British Pound is getting a boost from an October Brexit extension (as are UK iShares). The Australian dollar remains one of the strongest foreign currencies on the back of rising copper and iron ore prices (and rising EWA stock prices). Rising oil prices are boosting petrocurrencies like the Mexican peso and Russian ruble, as well as their respective stock ETFs (EWW and RSX). And that's supporting rallies in broader EM stock and currency ETFs (EEM and CEW). Of which China is the biggest part.

CHINESE IMPACT: Since China is the world's biggest commodity importer, a stronger Chinese yuan is probably contributing to rising copper, oil, and iron ore prices (as well as currencies and stocks tied to them). A stronger Chinese stock market is also helping lift stocks in Germany and the eurozone which are big exporters to Asian markets. Stronger foreign stocks broaden out the global stock market rally and are supportive to U.S. stocks. All of which demonstrates how circular and tightly linked these global intermarket relationships really are. That includes stocks, bonds, commodities, and currencies all over the world. And how they impact each other.

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Chart 6

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Chart 7

Chart 8