Junk Bonds May Finally Be Cracking

Any bearish phase in the broad market would be suspect without junk bonds also going bearish.

The top panel is nominal HYG (Junk). The middle is HYG/TLT (Junk/Treasury) and the bottom is HYG/LQD (Junk/Investment Grade). The two lower panels have been negatively diverging the post-March relief rally all along and we’ve been noting recently in NFTRH that nominal Junk has been rolling after failing to make new highs with the headline stock market indexes. Well, this week it has rolled beneath the 50 day moving average in another sign that risk ‘on’ is failing (Captain Obvious) in line with the up-turning Gold/Silver ratio and US dollar.

You see, your trusty Federal Reserve wants ’em all in and speculating because the stock market is a big part of the damn American economy now. The Fed in essence shepherds people into risk by their inflationary actions and I have little doubt they’ll attempt more balls out inflation as this phase fails. But for now, this is a negative macro signal.

junk bonds

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