Thursday, March 16, 2017

HYG High-Yield Corporate Bond ETF Daily Chart

The high-yield instruments are slapped silly over the last three weeks. The smackdown is reflected in the HYG and JNK charts. Rising wedges are very ominous patterns and price was spanked lower starting this month. The RSI and stochastics were overbot and the chart indicators are all neggie d (red lines) wanting to see a spankdown, which occurs. Remember the October spankdown Keystone described back then and played on the short side? Keystone was not paying attention and missed the top this time in the high yield arena.

HYG was at the top standard deviation band so a move back to the middle band would be expected which happened very quickly and price continued dropping to the lower band at 86. HYG bounces strongly yesterday on the Fed announcement tagging the middle band at 87.35 which is also the 20-day MA.

Concern surfaces in the high-yield instruments since much of the paper is exposed to the oil and gas industry. As oil prices drop, fear grows that energy companies will not be able to service their debt. If any companies then default or restructure this will negatively impact the high-yield instruments. Perhaps as much as 30% of the paper may be exposed to the oil and gas industry. There is also a lot of troubled paper exposed to the retail industry that has stores going belly-up each day.

The HYG weekly chart topped out with neggie d across all indicators so this creates a gloomy picture ahead for price. The HYG monthly chart is also uninspiring for the intermediate and long term. HYG and JNK would be expected to trade choppy at these elevated levels for a couple months but then likely roll over for extended downside for 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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