HYG High Yield Bond ETF Monthly Chart; Overbot; Rising Wedges; Negative Divergence; Upper Band Violation; Price Extended

The sick central bankers keep printing money like madmen driving note and bond yields lower (prices higher) and the stock market higher. Traders and investors are buying any asset with a heartbeat since the global central bankers are colluding and providing easy money forever.

After the Fall 2018 stock market crash, stocks bumped higher after Christmas Eve. This was short-lived, however, because on 1/3/19, the US and global markets begin slipping away into Hades. Keystone described this price action at the time. It was over for the stock market. The Federal Reserve has technicians and other market experts chained to desks in the basement of the Eccles Building so they knew the game was over. The global central bankers panicked on 1/3/19 and immediately coordinated a strong response to once again save the day and protect the wealthy privileged class. The Christmas Eve bottom held.

The Fed stepped into markets in January promising to print money basically admitting the December rate hike was a big mistake. It is surprising that investors continue believing in the Fed even after a 180-degree move from hawkish to dovish from December to January. Go figure. There is likely a delayed reaction involved. At some point forward, the realization will occur in people's heads that the sick global central banker collusion game cannot continue for much longer.

The blue circles show the big volume push in buying to begin the year once the Fed guaranteed that they will support easy money policies again. It would be expected for price to come back down into this 77-82-ish area for a look-see at that high-volume month. The selling volume was robust in May but then the dip-buyers jump in to send HYG to more new price highs albeit on lower volume.

Despite the recent ongoing euphoric joy in the stock and bond markets (global yields move lower), due to the central banker money-printing and a world awash in liquidity, the chart is ugly. This is a monthly chart so the long-term picture ahead is very negative. The RSI and stochastics are overbot and agreeable to a pull-back on the monthly basis. The red rising wedges are ominous since the collapses from rising wedges can be quite dramatic.

The red lines show universal negative divergence across all indicators; that is ugly. There is no more fuel in the tank to take prices higher. The Aroon is pegged at 100 with no place to go except down. When the green Aroon line crosses below the red line it is over for HYG. Price has violated the upper band so the middle band, at a minimum, at 82.20, is on the table. HYG is extended above its moving averages requiring a mean reversion. The ADX is down to 14 indicating that the rally higher is NOT a strong trend higher.

JNK is the same chart so you can bring that one up for further study. LQD, the investment grade corporate bond ETF, has gone parabolic, but its chart is in neggie d. MUB, the muni's, have also gone parabolic. HYG and JNK would be expected to roll over first, over the next couple months, and then LQD and MUB will likely top out and roll over, say, in the August-October period. It will not be surprising to see HYG at 77-82 in a month or two and at the 45-65 level in 2020 and 2021.

Equity earnings are questionable going forward. If earnings slow down, the level of debt takes away margin. It appears that it is a sell the high time for high-yield. Keystone does not currently have a position in HYG but will likely short it and/or JNK going forward. 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.

Note Added 6 AM EST Friday Morning, 7/26/19: Bloomberg News reports that much-followed hedge fund manager David Einhorn at Greenlight Capital is now shorting high-yield and corporate debt. Einhorn is betting against junk and investment grade debt.