Tuesday's message used hourly bar charts to show the three major stock indexes holding short-term support levels. Wednesday's daily bars show stocks continuing to stay above their green 20-day moving averages. They're usually the first line of support on market pullbacks. Ten of eleven market sectors are in the black Wednesday with technology being the only loser. Financials are one of the day's biggest gainers and are hitting a new recovery high. Bank stocks are leading them higher.
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The daily bars in Chart 4 show the Financial Sector SPDR (XLF) rising to another recovery high in Wednesday's trading. That puts the XLF at the highest level in ten months. Its relative strength ratio in the upper box is also rising. Banks are helping to lead the XLF higher. Chart 5 shows the KBW Bank Index (BKX) hitting a new recovery high as well. Rising bond yields (and a steepening of the yield curve) are one of the factors driving banks and financials higher.
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The daily bars in Chart 6 show the 10-Year Treasury yield climbing four basis points to 0.95%. Bond yields have been climbing since August. That's keeping downside pressure on Treasury bond prices. Corporate bonds, however, are holding up better. Chart 7 shows the iBoxx Investment Grade Corporate Bond ETF (LQD) consolidating just below its August peak. High yield bonds are doing even better. Chart 8 shows the iBoxx High Yield Corporate Bond ETF (HYG) hitting a new recovery high. That's not too surprising considering that high yield bonds usually track the stock market more closely.
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Editor's Note: This is an article that was originally published in John Murphy's Market Message on Wednesday, December 23rd at 2:10pm ET.
