Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

High-Yield Debt Market Eyes Sentiment Shift

Published 11/09/2017, 02:02 PM
Updated 07/09/2023, 06:31 AM

You've heard it before, one person’s trash is another’s treasure. Some see a pile of junk while others behold the makings of a masterpiece. It's the same way in the markets where you buy when there is blood in the streets. Blood or not, the high-yield debt market is in the midst of a sentiment shift.

Time To Get Out?

The chart below paints the picture using the high-yield ETF JNK, which has its share of bearish characteristics. First, RSI is in the bearish range while the MACD is falling. The price has also fallen below the 200-day SMA. It previously found a bid at that level, but that's not likely this time. And if that wasn't enough, major bond-market gurus are concerned.

Will it keep falling? Of course, it can.

SPDR Barclays High Yield Bond

but there are also signals of a drop in price that is overdone. About that RSI, it is now oversold, like it was in August where it bounced. The price is also well outside of the Bollinger Bands®, often a place where price reverses. There is 6 month support nearby as well. None of these suggest you buy junk yet. You need confirmation of a reversal before that happens. But perhaps it is time to plan what you will create with this pile of trash.

Latest comments

Always a bull, never a bear
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.