Junk Bond ETFs Flashing Positive Stock Market Signals
Chris Kimble | Oct 21, 2014 07:06AM ET
Junk Bonds are often regarded as leading indicators for key moves in the stock market. Popular junk bond ETFs SPDR Barclays High Yield Bond (ARCA:JNK) and iShares H/Y Corporate Bond (ARCA:HYG) have declined over the past few months, taking them down to support levels and pulling momentum down with them.
The above charts are weekly views of these ETFs, reflecting that both have created bullish wicks at support, with momentum the most oversold since the 2011 lows. Recently, while junk bonds were bouncing off support lines, our proprietary "Shoe Box indicator " was hitting 5-year support levels, sending off bullish signals beginning last week, while stocks still remained soft.
From a message perspective, this type of price action from the junk arena is usually a positive for the stock market.
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