I have mentioned before that junk bonds are usually leading the market by a week or two. While the stock market has been quite bullish lately, making new highs almost every day, the junk bonds are breaking down, a divergency one should not ignore. I think the market is telegraming us with a warning! Let me share the current chart of the junk bond ETF (HYG) vs S&P in the past year.
The right blue arrow shows how HYG closed decisively below the support of its 50 DMA. That has happened two other times this year marked by the two previous arrows. Following each of those times, HYG continued lower. And, the weak action in junk bonds spilled over into the stock market, and S&P fell 10% and 4% in the past two times when HYG spilled over.
Will history repeat? I bet so. Actually my crystal ball is telling me again that a jump in volatility is imminent. Feel free to ignore this warning. For my money, I'm accumulating VXX these days and very likely we will see a moonshot of VIX next week.
My crystal ball has never failed me and it won't this time, I believe!!😏😎
No comments:
Post a Comment