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Junk Bubble About To Break? Critical Levels At Hand

ByChris Kimble
Published 08/21/2013, 11:01 AM
Updated 07/09/2023, 06:31 AM

I Love junk bonds!

Two For One
They're awesome total return tools when the trend is up while they provide quality "leading signals" for the macro economy. Speaking of total return, the chart below illustrates that the Junk Bond Total return index is up nine-fold since 1990.
High-Yield Index
Rising Wedge?
Is a bearing rising wedge in place in the Total Return Index? Is a bearish and dangerous Eiffel-Tower pattern in place too?

The chart below shows that two of the largest Junk Bond ETF's could be at very important levels right now. JNK on the left is testing support after breaking lower out of a bearish rising wedge and HYG is actually breaking support.
Junk Bond ETFs
Historically Low
The lower inset chart reflects that junk bond yields are near the lowest in history and have formed a bullish falling wedge, which suggested higher yields should take place and push junk bond prices lower.

Lower junk bond prices are often followed by declines in the stock market. Use these assets to help with your portfolio construction and improve your overall returns.

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