Mish’s Daily: Turnaround Tuesday: Junk Bonds Flash Caution
Mish’s Daily: Turnaround Tuesday: Junk Bonds Flash Caution
Written by Michele ‘Mish’ Schneider
Since the end of 2023 and throughout most of 2024, the high yield, high debt bonds have been on a tear.
However, the party could be over.
Could be.
I follow the junk bonds closely, as they literally told us to exit the market and buy long bonds right before Covid hit.
Looking at today’s Daily chart of HYG, the price entered an unconfirmed warning phase today.
This is noteworthy as it is the first time the price fell below the 50-DMA since March 2024.
Nonetheless, that must confirm, plus, the slope on the 50-DMA remains up.
Furthermore, the good news is that HYG is underperforming SPY, which is risk on.
And HYG outperforms TLT the long bond, also risk on.
While this phase change could be premature, I do think it important to be prepared for different scenarios as the election gets nearer.
Real Motion shows a bearish divergence in momentum. Moving on to the weekly chart:
HYG is back beneath the 200-week moving average.
The daily chart shows a caution phase, while the weekly chart shows a recuperation phase.
But both are negative phase changes.
As the week has just begun, we need to keep eyes on that 200-WMA.
(The real fun does not begin unless HYG breaks below the 50-WMA, which it has been above all year.)
From this viewpoint, we need to prepare for either
- 1. HYG pops back over both the 50-DMA and 200-WMA thereby flashing a lot more risk on in store-good news
- 2. HYG deteriorates from here further, hence, we see SPY wobble, and should the long bonds catch a bid, we got trouble.
The monthly chart is also interesting.
So far, this month is trading within the range of last month.
That is significant.
In September, the 80.37 high and 78.65 low is a good range to watch.
Given both the Daily and weekly charts both showing a potential inflection point in the works, the monthly chart gives us a better perspective.
Note how the price cleared the 23-month moving average aback in late 2023.
That was a clear signal to go long given the switch to risk on.
Now, as we enter the last quarter, elections, and more inflation, remember the market remains risk on-but watch for potential cracks.
Just in case. Check out the podcast Geoff and I did this week. We discuss phases and how the current market has impacted what is usually a long list of instruments to watch.
Educational purposes only, not official trading advice.
For more detailed trading information about our blended models, tools, and trader education courses, contact Rob Quinn, our Chief Strategy Consultant, to learn more.
Get your copy of “Plant Your Money Tree: A Guide to Growing Your Wealth”
Grow Your Wealth Today and Plant Your Money Tree!
“I grew my money tree and so can you!”- Mish Schneider
Mish in the Media
Geoff and Mish Podcast Geoff and Mish Walk you through how phase changes create great trading opportunities in any market condition 10-22-24
ProInvestor Insights The Economic Modern Family is Teaching Investors Patience IS a Virtue! 10-21-24
Business First AM Mish goes shopping and tells you how to pick a bottoming stock 10-21-24
Maggie Lake Is the Trump Trade Gathering Steam? 10-18-24
NYSE TV Mish covers the massive consolidation, gold and the need for more patience in stocks 10-18-24
Business First AM Mish takes you through the continued volatility in spite of a strong week in the market 10-18-24
Yahoo Finance Opening Bell Mish and Yahoo team discuss the small caps versus tech and they interest rates as the missing link 10-17-24
Stockpick.app Mish talks about the inflow of cash and sector rotation into Regional Banks 10-16-24
Real Vision Mish shares how to safeguard your investments and identify where to find opportunities amid the turmoil. 10-16-24
BNN Bloomberg Mish covers the importance of the retail and other sector rotations currently happening in the market 10-16-24
Coming Up:
October 28 Podcast with Geoff Bysshe
October 24 Live Coaching
October 28 Benzinga Pre Market
October 29-November 4 Vacation
November 6 BFM Radio Singapore
November 7 CNA Asia First
November 18 Yahoo Finance
December 5-7, 2024 Money Show Master Class
Weekly: Business First AM, stockpick.app
ETF Summary
(Pivotal means short-term bullish above that level and bearish below)
S&P 500 (SPY) 575 support 585 resistance
Russell 2000 (IWM) 215 support 227 resistance
Dow (DIA) 435 next? If holds 425
Nasdaq (QQQ) 485 pivotal support 500 resistance
Regional banks (KRE) 60 pivotal
Semiconductors (SMH) 242 support 265 resistance
Transportation (IYT) 69.50 support
Biotechnology (IBB) 142 support zone 146.50 resistance
Retail (XRT) 78.99 would be the highest monthly close since 2022
iShares iBoxx Hi Yd Cor Bond ETF (HYG) 79.50 nearest key support
20241023