According to the price action the 82,24 level could be a good support. The pullback shows a first leg up, AB, and a correction. A good entry in this retrace could bring to the 84 level as a possible target. I'm looking for an AB=CD pattern. The target is a resistance area too. Risk reware ratio 4,5. SL below 0,382 fib line.
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Credit ratings of the US firms are deteriorating fast-pace. This year we will see new record in corporate defaults. We have seen this year already 32 global corporate defaults (2009 there was 42, this year we will have more than that!).
This could be a turning point of this nonsense rally.
Short if the neckline...
There was considerable capitulation across 'risk' assets this past week. The question is how far the towel is thrown. Merely a pause for liquidity or the snap from reality that spurs full profit taking?
As measured by the ratio between HYG (Junk Bonds) and TLT (US Government Bonds, 20 Year).
HYG is now outperforming TLT by 14% from the extreme level as that seen in late 2008.
Clearly the fears have outweighed the evidence for this disproportionate pricing of junk bonds.
Back in 2008 we had financial firms closing their doors, Lehman, AIG, Bear Stearns, Banks...
I want to start this year with a market I have been watching closely recently, and for good reason. The HYG, which is the most liquid high yield corporate bond exchange traded fund, has taken a beating over the past few months and looks ready to make another move lower. Not only is this trade attractive from a technical perspective, but the fundamentals are on...
The S&P500 is highly correlated with the high yield bond indices. Here is a chart that illustrate this correlation and warn of something major ahead..
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Best Regards,
Technician
So HYG has tried to retest and fail now twice, the TL of the previous channel. Its in denial. The thick blue line is its support. If we head back down to it and close below, the official bear market in stocks has begun. IMO.
The blue triangle is the area to watch, descending below the blue line is bad, very bad. next support, no one knows, 2008/09 lows maybe, and could be in a hurry, even a flash crash?
US Corporate Bonds (8-10Yrs) Vs US Treasury Bonds (20Yrs)
Rising Ratio = Corporates Outperforming Treasuries
BLUE BARS = THE S&P500 STOCK MARKET INDEX
When Corporates underperform Treasuries and the ratio declines on this chart (black bars), USUALLY the stock market has gone down at the same time (NOTE THE BLUE BARS at the same time as the RED HIGHLIGHTED...
Trend down since September 2014 for HYG
US Junk Bonds are still Trending Down Means investors are taking Risk Off the Table
Trend Down means a 2-month low in an indicator that measures the ease of movement in the market and it has stayed in a down trend position since then. The magnitude of the decline isn't that great here, as the trend turned down in...
I did not monitor HYG closely and thus totally missed the short opportunity. Looking back, I put the timing method on the chart (easier when looking back, isn't it? : -).
