Tuesday, July 22, 2014

HYG High-Yield Weekly Chart Rising Wedge Overbot Negative Divergence

High-yield instruments have rolled over from lofty levels. This is one of the bubble areas Keystone has been highlighting in recent months. SJB (very thinly traded) is an ETF that moves inverse to high-yield (SJB moves up if HYG falls) and Keystone remains long. Collapses out of rising wedges can be quite dramatic. The fall from the top is harsh but still nothing that a rising wedge pattern is capable of. The purple circles show that price has not back tested the 20-week MA, now at 93.63, for close to one year, until now. Price always reverts. The 50-week MA, now at 91.17, has not been tested in one year as well. A collapse from a rising wedge could easily tag the 50-week MA and prices typically overshoot to the downside just as they overshoot to the upside.

That said, the 20-week MA is a logical place for a relief bounce. The MACD and stochastics are weak and bleak. The RSI and money flow, however, can help with a short-term relief bounce. Overall, the expectation is that the top is in for high-yield. Even if price ventures up for an M top, or double top pattern, price is not expected to make new highs again. HYG has jumped from 40 to 95, +122%, due to the Fed's easy money starting with QE1 in March 2009; over +25% per year but the Fed says there are no bubbles in this area. HYG may recover in the near term but lower prices are expected going forward for the weeks and months ahead. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

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