JNK Barclays High-Yield Junk Bond ETF Weekly Chart; Negative Divergence

Stick a fork in the junk, it's cooked. As Willie sings, turn out the lights, the party's over. The party wine bottle is empty. The red lines show universal neggie d on the weekly chart. She's done. A move lower will begin and run for several weeks. JNK will seek the 20-day MA at 106 for starters and may want to eventually retrace to that 101-104 congestion zone and sideways channel.

Last week, as per the Bloomberg/Barclays high-yield tracker, the average junk yield drops below 4% for the first time ever a historic event. If you bot JNK last week trying to jump on the upside bandwagon, you are about to receive your head on a platter. HYG is the same chart although its RSI is trying to sneak out an incremental higher high. If so, HYG will print a jog move down during the week ahead, but then recover for a few days back to the current high at 88-ish, and then as long as all the indicators are neggie d, that would be the top (a couple weeks out).

Watch the MACD's on the weekly charts because as the first print occurs on Tuesday morning, the candlestick will begin at an equal price high. The MACD may appear neggie d right away which tells you the top for HYG is in right away.

LQD is the first to receive the neggie d spankdown. Bring up the LQD weekly chart and you can see the higher high in price from August to the start of this year. The corresponding period for the indicators show negative divergence across the board. A neggie d smackdown would be expected and voila, it occurs as this year begins. So LQD leads the way lower. This same thing is about to happen to JNK and HYG on the weekly basis. The LQD chart indicators are weak and bleak so price would be expected to continue lower.

Bring up MUB; this is the muni's. The MUB weekly chart is in negative divergence although the RSI is trying to create some VST joy. MUB is topping out as well. LQD should continue lower. JNK will roll over lower on the weekly basis starting in the week ahead. HYG will then follow and roll over on the weekly basis probably beginning the week of 2/22/21. MUB will then roll over after HYG.

As an aside, considering all the crazy money coming into the market, people may not even know what they are buying. That is hilarious. A week ago, money is flooding into ETF's at a record pace. As soon as the stimulus check arrives, it is tossed into the stock market and ETF's as the family eats franks and beans. Traders and investors have been tripping over each other buying VOO, IVV, SLV, QQQ and HYG. VOO is going to end up being voodoo, it and IVV move with the SPX and they are topping-out right now.

Silver is something to be leery about. It made the huge run higher on the solar industry. People in the know realize that solar cannot be scaled-up to a massive scale because of the battery technology. The solar cells are capable but not the current battery storage. Thus, think twice about silver and it is likely a good idea to lighten that on the way forward. SLV weekly chart looks cooked.

QQQ is the red-hot tech stocks. Short it. QQQ is topped-out now on the weekly chart. All the indicators are neggie d so it will begin receiving a smackdown that will last several weeks. QQQ is a short or QID could be played long. Or PSQ long. That bring us to HYG. Comically, young folks may be buying HYG thinking it moves up when yields move higher? The JNK, HYG, LQD and MUB are prices not yields so these charts running higher is a higher price lower yield; hence, the junk record low.

 It is a euphoric top occurring in markets. Complacency is at record levels. Moral hazard is in play since everyone believes markets are guaranteed to go up forever due to non-stop central banker support. People that never invested before are putting stimulus money into the stock market and some of them likely do not even understand what they are buying. Markets are at a historic long-term inflection point.

The four bond ETF's generally moved with Treasuries so a move lower in TNX, which is the 10-year yield chart, is a lower move in yield, and that would correspond to a lower yield in junk which is the JNK chart moving higher. And visa versa. TNX would move higher reflecting a higher yield and junk yields would float higher which means the JNK and HYG charts would move lower. That changed in the back half of 2020. Treasury yields bottom in August and then sneak higher ever since creating the reflation chatter. HYG and JNK move higher as well which reflects money chasing into junk sending yields lower. So this is different now.

And more interesting, is that TNX and HYG and JNK are all in the process of topping-out on a weekly basis. It looks like HYG and JNK will top out first say in the week ahead and the week after and then followed by TNX.

The monthly charts clear-up the divergence. The TNX monthly chart has long and strong indicators so it is set up for higher yields moving forward for months ahead. Remember the prior TNX charts; yield will not top out until the MACD goes neggie d on the weekly chart, and keep an eye on the RSI, too. So yields will be soggy, likely in conjunction with the stock market dropping, for multiple weeks ahead. JNK and HYG will drop as well during this multi-week decline. Then when the smoke clears in late March or April, Treasury yields will likely move sideways to sideways higher for months and years to come. The 4-decade bond rally will be over. The stock market will remain soggy all year long into next year and JNK and HYG will follow the stock market. That will place the bond ETF's and 10-year yield chart back in sync going forward. For the months ahead, TNX will be moving slowly higher reflecting slowly increasing yields and rates. At this same time as the year moves along, JNK and HYG will remain soggy like the stock market reflecting buoyancy in the high-yield yields which will be back in sync with TNX. Interesting. That is clear as mud. Perhaps too much rambling. Keystone be a Ramblin' Man like Dickey, in good company, along with the Delta women.

Keystone does not hold any of the bond tickers but is short QQQ and long QID. JNK and HYG can be shorted going forward. You typically do not get a lot of movement with them but JNK and HYG should work out fine as a short trade over the coming weeks maybe as much as 10% say by the end of March. 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 Tuesday, 2/16/21: CNBC commentator Brian Kelly tells viewers to buy HYG with both hands.

Note Added Sunday, 2/21/21: JNK 109.30. Weekly chart ready to collapse.

Note Added Friday Morning, 2/26/21, at 6:32 AM EST: JNK drops from 109.65 to a low at 108.22, a -1.3% drop.