Are Junk Bonds sending us an important message?

high yield bonds

From Chris Kimble:

Junk Bonds have sent an important message to stocks at important tops and bottoms over the past 20-years! Junk bonds sent bullish messages to stocks as they created bullish divergences at the lows in 2003 and 2009.

They also created bearish divergences, sending a negative message to stocks in 2000 & 2007, as they turned lower months ahead of S&P topping.

This year junk bonds have been diverging with the S&P 500 for almost a year. This chart highlights that Junk bonds and the S&P 500 are both testing support off the 2009 lows at the same time.

Keep a close eye on what Junk bonds do between now and the end of the year as they test 9-year rising support. How they perform at support, should send an important message to the S&P 500.

The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) was trading at $84.38 per share on Monday afternoon, up $0.11 (+0.13%). Year-to-date, HYG has declined -1.69%, versus a 2.60% rise in the benchmark S&P 500 index during the same period.

HYG currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 50 ETFs in the High Yield Bond ETFs category.

This article is brought to you courtesy of Kimble Charting Solutions.