Stock Direction: Watch High-Yield Spreads
Chris Kimble | Mar 25, 2014 11:10AM ET
High-yield funds are considered by many to be good leading indicators for the future direction of the stock market. Above are four high-yield funds (Not ETF's) that reflect a move higher this year: all are above rising support and above their 200-day moving average lines.
One has to note that -- at this point -- high yields are not broadcasting a concerning message.
Spread Warnings
The inset box reflects that the adjusted spreads in the high-yield sector are reaching historically low levels. History has shown they can stay that low for a long time. But notice that the breakout above resistance back in 2007 was a signal that equities were in danger of lower prices in the future. A similar pattern is taking place again in spreads. If the spread breaks to the upside, a concerning message would be coming from the High yield complex/
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