Junk Bonds Are Sending A Familiar Bearish Messages
Chris Kimble | Nov 20, 2018 02:03PM ET
This chart looks at junk-bond fund PHDAX and the S&P 500 over the past 25 years. Junk bonds sent bearish messages before stocks peaked in 2000 and 2007. Bearish divergences took place for 24 months in 2000 and for 7 months in 2007, prior to stocks peaking and turning much lower.
Junk bonds have been sending a bearish message to stocks for the past 16 months, as another bearish divergence has been taking place.
Junk bonds and the S&P 500 are currently testing 9-year rising support. If both break below 9-year support, they would be suggesting that a long-term low in stocks is not in play.
Are junk bonds sending an important message as they did in 2000 and 2007 or will it be different this time?
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