There is no question that credit markets have been distorted for a long-term, but, fortunately, if you are in tune with what is going on it help get you out of the way of a steam roller.

High-yielding junk debt has been a huge trade this year as investors continued to seek yield despite valuations and a clear crowed trade. The chase for performance also led investors to pile into corporate debt as the "safer" alternative to junk and grossly negative European debt. Unfortunately, the tide has been turning and investors are beginning to pay for it.

Junk debt has seen six consecutive days of declines as flows continue to come out of these exchange-traded funds like HYG , seeing a single-day record outflow of nearly $1B, and JNK . There also has been little coverage on the corporate side, but capital is also bleeding.

And we are witnessing some troubling signs that could cause spreading implications to broader markets. Nearly a year ago, 361 days to be exact, my "Is HYG leading SPY Lower" pointed out a pivotal point for markets. In less two months later we saw junk yield spreads absolutely blow out to over 1,000 bps and stocks saw the worst start to the year ever.

With a combination of a highly anticipated Federal Reserve rate next month hike and slowing growth (sound familiar?) volatility has been insidious.

Technically, the price action near-term is oversold but over the course of the next couple months that will likely not matter, we could see a January 2016-like selling spree as uncertainty creeps up.

On a longer-term perspective,, HYG has been trading within a HUGE triangle, and lower support will be tested!

The near-term trend broke, and today's price action is seeing some support on the 200-day EMA . The momentum is gaining quickly with the ADX-indicator popping from 10 to 15, while topping 20 will indicate a substantial price trend. From my previous note last November, we saw momentum gain from 17 to top at 48.

Even if Janet Yellen backs away from hiking rates (which will cause a mutiny on her hands), the strength of the DXY on the back drop of slow, grinding-lower growth will put continued pressure on junk bonds.

Furthermore, as with last November, we see lower crude oil from here; and this will undoubtedly cause concern for high-risk shale producers.

Trend cautiously. HYG at $70 is our 6-month target.

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