With all the excitement about the recovery in stocks, investors should take note of the SPDR Barclays High Yield Bonds ETF (JNK). It’s been trading heavy and leaning on important support for a few months.
Back in October, I wrote the post “Are Junk Bonds Trying To Tell The Market Something?“. In that post, I highlighted key price support for high yield bonds and why traders could expect a bounce.
Well, we got a bounce… but most of that has been given back. Now the high yield bonds ETF (JNK) is pressuring the lows at critical price support.
In the post from October, I highlighted a price pattern that completed around 35ish. This support level is barely holding and high yield bonds look heavy, to say the least.
I think investors should be watching JNK closely. If you simply look at the chart presented below, you’ll notice that the high yield bonds ETF has not closed below the boxed in yellow area since the rally began in 2009.
Large institutions tend to bail out of risk assets when they turn risk adverse so watch this closely.
High Yield Bonds ETF (JNK) Chart
Junk bonds often have tell the tale of the underlying tape. If JNK can hold this price support area, then risk may stay on. If not, another pullback in stocks may be in order. Thanks for reading.
Twitter: @BartsCharts
Author does not have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
