Junk Bonds High Yield and Equities

The last time the markets pulled back from All Time Highs was in late July. Whether or not junk bonds led the markets lower is a subject for debate, but we’ve seen this picture before. March saw a similar retreat by Junk and High Yield bonds. Soon thereafter, equities dipped back to the rising 50ma.

Junk Bonds and High Yield

Half a dozen market “Blogs” highlighted Junk and High Yield Bonds yesterday. One spoke of divergence, with Junk moving lower and SPY moving higher. My take is, no matter what your opinion, Junk is definitely selling on higher volume. And, it broke the long standing daily trend line on Tuesday, in addition to the rising 50ma.

Junk-Bonds-11-09-2017

It is interesting to note the VBP support and breakout level (38.80 +/-) for JNK in the chart above. Should JNK lose that level, targets shift down to 36.40. Stochastic is in the green zone, a caveat for the bears.

SPY – The Equities Equation

We are assuming dip buyers could step up today, as a knee jerk reaction appears to be unsettling market participants this morning. What has changed? Earnings and sales, reported by the majority of S&P500 companies have steadily improved.

That said, we watched numeous block size trades cross the tape over the past couple of weeks in this zone above 257.00 (+/-). If price action dips below the 9ema, the next target is the 20ema (256.62 +/-) and VBP support at 257.00 (+/-). The 20ema would be a pullback of (-0.93%). All speculation aside, this assumes SPY will not bounce this morning, as trades continue to remain near 257.89 in the pre-market session.

SPY-daily-11-09-2017

TICK cumulative is still showing an appetite to “buy” more stocks on a cumulative basis. That should change and cross lower if this is “the top.”

We will discuss this and more “LIVE” at 9:20 AM.

I’ll see you then,

Vinny



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Vinny Gambini

Trade Fundamentals w/ Technical Analysis - CANSLIM method using high probability setups and Ichimoku Trend Analysis. Architect, Family Man and Father of three.