U.S. High-Yield Corporate Bond ETF In Jeopardy
Candy Matheson | Jan 28, 2018 12:06AM ET
The High-Yield Corporate Bonds ETF (NYSE:HYG) is in jeopardy at major resistance.
The monthly chart below shows that price is facing double resistance at the confluence of a 60% Fibonacci retracement level at 89.29 and the upper edge of a large triangle formation (both of which began forming during the 2007/08 financial crisis to the 2009 lows).
Major support sits below at the confluence of the 50% Fibonacci retracement level at 83.98 and the triangle apex around 83.30.
The momentum indicator has dropped below the zero level on this timeframe, hinting of more weakness to come, as has been the case, historically.
The next monthly chart shows price action of HYG compared with the S&P 500 Index (SPX).
HYG began to diverge from the SPX as far back as April of 2013 and looks like it's getting ready to roll over again.
The momentum indicator has recently spiked and is at an all-time high on the SPX.
The gap in price action between these two began to accelerate right after the 2016 Presidential election, and is ever widening as SPX spikes in parabolic fashion.
If HYG drops to or falls below its major support around 83.30, we could see some serious selling afflict, not only the SPX, but also other major indices.
If that happened, the chances of the SPX reaching 3000 anytime soon (as I wrote about here) may be in question, so keep an eye on other factors that I mentioned in in my 2018 Market Forecast post.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.