Canaries at Odds

This article calls junk bonds a canary in a coal mine.

Analysts often view ructions in the high-yield, or “junk-bond,” market as a canary in the coal mine, or an early warning to when investors might start taking flight from riskier assets altogether.

I obviously see bearish junk as a bearish confirmation for the markets, but it’s not a canary. Canaries are/were put in coal mines to warn miners ahead of time; you know, so they can get the hell out of there in the face of danger. HYG clearly broke as or even after the stock market broke after we’d noted it rolling sideways for a couple weeks. But canary? No dear MSfM article. It’s a component of the speculative environment the Fed has instigated.

But what of the real cyclical canary? What of the Semiconductor Equipment segment of the Semi sector? What of Lam Research, Applied Materials and others? LRCX is the one I bought on the drop to the 200 day average in order to test the cycle. It has not gone bullish but it’s sure been firm over the last several days of market angst.

lrcx

It could just be a reaction to the negative sentiment that was stirred up by the Trump admin’s antagonism of Chinese chip maker SMIC. But historically, and as we proved in 2013 with a positive Semi Equipment view leading a new economic cycle, Semi Equipment is the canary’s (broad Semi) canary. The leading cyclical edge of broad Semi. So is this a reaction or a canary?

Here’s the news that caused the downward plummet and the Semi industry’s response.

semiconductors

For “best of breed” top down analysis of all major markets, subscribe to NFTRH Premium, which includes an in-depth weekly market report, detailed interim market updates and NFTRH+ dynamic updates and chart/trade setup ideas. You can also keep up to date with actionable public content at NFTRH.com by using the email form on the right sidebar. Follow via Twitter @NFTRHgt.

Testimonials