HYG broke its' 200 mda - RUT is following HYG down. RUT will likely follow it through the 200mda unless the Plunge Protection Team at the Federal Reserve comes to save it.
Corporate Bonds continue in their Bull Flag Channel. Bond market keeps telling us that the Fed cannot remain higher for longer. Not sure on timing, however, it wouldn't surprise me if we see the Fed reverse course in the some what near future.
I trade options so I look for the cheapest way to make the most amount of money. The most Delta for the least Theta. Last year it was MSTR, this year it is HYG and JNK. Record short positions on HYG started in March 2023 and it still continues today.... for example there are 20,000 puts on HYG expiring this Friday the 29th and 1370 puts.... that's a P/C of 14.54/1...
High yield corporate bonds show a significant correlation with the risk-on/risk-off sentiment for the S&P 500 (SPX). As we can observe, the current market structure resembles a wedge, which can technically serve as both support and resistance.
To add complexity, we're currently at a channel resistance level, which also happens to be a historic trendline. This...
This comparison of High Yield (via $HYG) against TSY of similar maturities ($IEI). As the ratio starts to turn down, market gravitates towards risk off environment. Notice how it touches the trend line but doesn't break thru it.
The high-yield market (HYG)
High yield and stocks are normally highly correlated and the HYG ETF often acts as a barometer for strength in the Stock market..
As you can see things have gotten tight here in the pennant and HYG not surprisingly has chopped around just like the Spy.
Bears will see a H&S
Long only over 75 (Weekly 50sma)..
Short under 74.00...
$HYG looks like it's about to fall.
There's a H&S pattern forming on the 4Hr timeframe and price just rejected the 200DMA.
Should price break support at $73.05, I think we'll see a quick move down to the $69 region, maybe even lower.
I've taken some puts just incase this plays out.
The chart is what I have felt is the most important chart to watch for sometime . We rallied and stopped right at the trend line . I have watching this as to it will become an issue for the sp 500 going forward . best of trades WAVETIMER
Flashing big warning signs. You guys need to be really carful. All the gains can get wiped out in just a few days. Covid is proof where most stocks got halted while the prices are dropping like a stone.
Orange Line = SPX
Blue Line = HYG/IEI = High Yield/U.S. Treasury Bonds
Strong Correlation between HYG/IEI and SPX.
Ascending Triangle pattern for HYG/IEI indicates more upside --> SPX to the moon.
HYG has made an inverse H-S-H pattern with an upward potential of approx. 10%, if the current break-out of its neckline is sustainably confirmed. In case this confirmation comes, we will have a valid confirmation of another bullish move of the S&P 500 towards 4400 points. Good to watch out and not to become bearish too early without enough evidence.
Bonds are giving us the signal that good times are on the horizon. This signal (bond equity divergence) has been my favorite signal this year, and I am hoping it continues to remain fruitful. I would not fade this indicator! Going long up here seems scary, but this gives me confidence that I didn't miss the final big move down :)
