A chart you should be scared about

I wrote about junk bonds late Dec last year, entitled Junk Bonds Are Sending an Ominous Warning. While this was not a short-term warning, the junk bond EFT HYG tanked almost immediately after that call from about 81 to 75 within a few weeks. However, since mid Feb, junk bonds have mounted an impressive rebound along with the overall market. HYG is trading hands around 84. But I think junk bonds’ bouncing may likely be coming to the end. Actually its chart looks really scary and poised to plunge again. You see, HYG is hitting against not only one but two resistences (the 2 red lines), one longer term dowtrend line and also a short-term overhead resistence. In addition, while HYG is moving higher, its momentumn indicator, MACD, is showing a negative divergence (see the 2 green arrows pointing to opposite dierctions). Putting these together, I think there is good chance that HYG will start its next leg down soon, if not yet already. When junk bonds decline, the overall market will follow as well. This is what we saw in the first 2 months of the year and we are going to see it again soon.