OnTheRadar: DJIA Posts New Record; 10 Straight Days of Gains

--Other Markets Languish in Ranges

By Vicki Schmelzer

     NEW YORK (MNI)   - The Dow Jones Industrial Average posted a new life-time

intraday high and closed at a new life-time high close also Monday, which was

the sole excitement at the start of a new week. 

     Analysts continued to point to TINA (There Is No Alternative) as to why the

DJIA keeps marching higher. 

     Other markets remained directionless and languished in recent ranges. 

     Ten-year U.S. Treasury yields were last near 2.258%, after trading in a

tight 2.255% to 2.282% range. Yields hit a low of 2.218% August 3. 

     While the 10-year yields have moved back above the 55-day moving average,

currently at 2.245%, the market will be reluctant to become bearish towards U.S.

Treasuries until the 200-day moving average, at 2.311%, is vaulted decisively.  

     U.S. Treasury yields bottomed June 14 near 2.103%, which was the lowest

since Nov. 10, when 10-year yields saw a wide range of 1.991% to 2.145% two-days

after the U.S. election. Nov. 10 was the last time 10-year yields traded below

2.0%.

     U.S. yields subsequently recovered, with the June lows deemed overdone,

with 10-year yields rising to 2.396% July 7, the highest since mid-May. More

recently, U.S. yields topped out at 2.357% July 14 and have been on the

defensive subsequently. 

     As background, U.S. Treasury yields posted highs near 2.421% on May 11,

which was the highest yield since March 31, when the 10-year yield peaked at

2.431%. These levels will be the next larger topside hurdles.

     On March 14, ahead of the Fed decision, 10-year U.S. yields topped out at

2.628%.

     As a reminder, 10-year U.S. yields rallied from lows near 1.720% Nov. 9,

the day after the U.S. election, to highs near 2.639% on Dec. 15, 2016, which

was the highest since the Sept. 19, 2014, peak near 2.655%.

     Ten-year German Bund yields closed near 0.459% Monday, after trading in a

0.456% to 0.491% range. 

     Bund yields backed off after the ECB left policy unchanged July 20, but up

until last week, held above 0.50% on expectations of new insight into the

central bank's bond buying plan, set to expire at the end of December, either at

the Jackson Hole symposium in late August or at the next monetary policy meeting

Sept. 7.  

     The July 12 yield high of 0.619% was the highest since Jan. 4, 2016, when

Bund yields peaked at 0.627%, the 2016 high. The next level of resistance will

be 0.651%, the Dec. 30, 2015 high. 

     The June 14 low of 0.225% was the lowest since April 20, when yields

bottomed at 0.192%.

     As background, Bund yields fell to a low near -0.161% Sept. 27, 2016,

versus the life-time low around -0.2059% seen July 6, 2016.

     Ten-year UK Gilt yields closed around 1.139%, after trading in a 1.137% to

1.183% range. Gilt yields and sterling remained on the defensive after last

week's Bank of England decision. 

     The July 7 high Gilt yield of 1.338% was the highest since Feb. 6, when

yields peaked at 1.370%.

     The June 14 low of 0.923% was the lowest since Oct. 7, when Gilt yields

bottomed near 0.905%.

     On Jan. 26, 2017, 10-year UK yields saw highs near 1.530%, which was the

highest yield since Dec. 15, when yields hit 1.536%, the highest since May 5,

2016, when Gilt yields saw a high near 1.538%.

     Ten-year Japanese government bond yields closed around 0.068%. Yields hit

highs near 0.108% on July 7, which prompted the Bank of Japan to step in buying

bonds, offering to buy 10-year JGBs in unlimited amounts at 0.11%. 

     Current high yields compare to April 20, when JGB yields flirted with

negative territory for the first time since last November and the Feb. 3 highs

near 0.150%, which were the highest since the BOJ introduced negative interest

rate policy back on Jan. 29, 2016.

     In currencies, market players looked for dollar rallies to sell into and

were not yet convinced that the modest greenback rebound, seen in the wake of

upbeat U.S. non-farm payroll data Friday, would have legs.

     The euro held near $1.1794, in the middle of a $1.1766 to $1.1814 range.

     Last week's range was $1.1723 to $1.1910, with the former acting as initial

support. The latter was a 30-month high and the highest since Jan. 6, 2015, when

the pair peaked near $1.1969. The euro last traded above the psychological

$1.2000 mark Jan. 5, 2015.

     The 2015 euro high was $1.2109, seen Jan. 1. And two weeks earlier, on Dec.

16, 2014, the euro peaked at $1.2570. 

     Dollar-yen held around Y110.73 Monday, in the middle of a Y110.65 to

Y110.92 range. The pair traded in a Y109.85 to Y111.05 range Friday, which was

also last week's range.

     Friday's low was the lowest level since June 15, when dollar-yen troughed

at Y109.27. 

     Dollar-yen bottomed at Y108.83 June 14, the day U.S. 10-year yields posted

their most recent low of 2.103%, and then tracked U.S yields higher, topping out

near Y114.49 July 11, the highest level since mid March, around the same time

10-year yields hit 2.396%. 

     More recently, dollar yen rallied to Y112.20 July 26, which was the highest

level since July 20, when the pair peaked at Y112.42.

     In commodities, spot gold was closing near $1,263.40 per ounce, after

trading in a $1,255.87 to $1,260.00 range, The August 1 high of $1,274.16 was

the highest since June 14 when gold peaked at $1,280.77. 

     On June 6, the precious metal posted a high of $1,296.15, but then stalled,

creating a double-top with the $1,295.56 high seen April 17. Subsequently, gold

moved lower as U.S. Treasury yields and the dollar recovered, bottoming July 10

near $1,204.90. 

     A break above the June 14 highs will target the early June peaks. 

     NYMEX September light sweet crude oil futures settled down $0.19 at $49.39

per barrel, after trading in a $48.54 to $49.73 range. 

     On August 1, West Texas Intermediate saw a wide range of $48.37 to $50.43,

with that day's high the highest since late May. The August 1 range has

subsequently acted as both support and resistance. 

     Most recently, WTI topped out at $52.00 May 25, before the announcement of

a nine-month extension of OPEC/non-OPEC production cuts. The extension was

largely priced in and oil fell to $42.05 on June 21. 

     This week, WTI traded both sides of its 200-day moving average, currently

at $49.38. 

     Trading continued to be driven by supply rather than demand, with concern

about OPEC/non-OPEC non-compliance as well as increased U.S. production. 

     Last Saturday, OPEC announced that meetings between the Joint OPEC/Non-OPEC

Technical Committee (JTC) and some OPEC and non-OPEC country representatives

would take place August 7-8 in Abu Dhabi, UAE, with the focus on identifying

"ways and means of raising levels of production."

     On the U.S. front, Baker Hughes rig count data, released Friday, showed a

one rig decrease to 765 rigs for U.S. "oil-only" rigs in the week ending August

4. This is still more than double the 381 rigs seen a year ago. However, rigs

were still down 52.5% from the peak rig count of 1,609 rigs seen Oct. 10, 2014.

     In U.S. stocks Monday, the DJIA posted a new life-time intraday high of

22,121.15, and saw a new life-time high close of 22,118.42.  

     On July 27, Nasdaq Composite and S&P 500 posted new life-time intraday

highs of 6,460.841 and 2,484.04 respectively, before succumbing to profit-taking

in subsequent sessions. 

     The S&P 500 closed up 0.16% at 2,480.91. At Monday's close, the index was

up 10.8% year-to-date. 

     The CBOE's volatility index or VIX was last around 9.90, in the middle of a

9.76 to 10.32 range. 

     The July 26 low of 8.84 was a new life-time intraday VIX low. The prior

life-time intraday low was 8.89, seen Dec. 27, 1993. 

     The VIX posted a high of 16.30 on May 18 at the peak of risk aversion, not

far from the 16.28 high seen April 17 that was driven by North Korea concerns.

     It would take a close above the 200-day moving average, currently at 12.00,

to suggest risk appetite was waning. The VIX last closed above its 200-day

moving average in mid-May, but then only briefly.

     This week, the U.S. line-up is light, with only PPI and CPI, due out

Thursday and Friday, in terms of major data. 

     However, there is a host of key Chinese data being released, starting with

key trade data Tuesday. 

     MNI's median estimate sees the surplus rising to $46.4 billion in July from

$42.8 billion in June. Chinese exports are see rising 10.8% and imports are

seeing rising 17.5% in July. 

     --follow MNIEyeonFX on twitter.com --

--MNI New York Bureau; tel: +1 212-669-6438; email: vicki.schmelzer@marketnews.com

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