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Stocks Want To Know What Junk Bonds Will Do Next

Published 09/13/2016, 10:57 AM
Updated 07/09/2023, 06:31 AM

Junk bonds are often viewed as leading indicators for the stock market. Rising junk prices are usually greeted by stocks in a positive way and weak junk prices are often viewed in a concerning way.

SPDR Barclays High Yield Bond

JNK faced a triple breakout test at (1) a few weeks ago, with momentum at very lofty levels. Since hitting the breakout test, JNK has been a little weak.

JNK is now testing rising support of a potential bearish rising wedge at (2). Risk-on trade in stocks would like to see a breakout at (1).

If JNK breaks support at (2) and turns weak, historically it has meant that stocks have struggled to make large upside gains.

Bottom Line

Junk is at an important price zone.

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