Junk Bonds Suggest Stocks May Have Much More Downside
Chris Kimble | Sep 29, 2022 11:19AM ET
When stocks show weakness, we can learn a lot by watching the credit markets. Today, we look at the Junk Bonds ETF, the SPDR Bloomberg High Yield Bond ETF (NYSE:JNK).
Below, we share two charts that help better illustrate what is happening in the broader markets.
The first is the JNK on a weekly timeframe. As you can see, the ETF is nearing its COVID lows and has fallen much lower than its June low. This has formed a bearish divergence with stocks, as several indices have yet to puncture the June low, or, if they did, it was very marginal.
The second chart looks at $JNK versus the SPDR S&P 500 (NYSE:SPY).
This illustrates just how much further $JNK has fallen compared to stocks.
In summary, stock bulls do not want to play a game of catch-up with junk bonds.
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