HYG High Yield Corporate Bonds Weekly Chart Exposure to Energy and Commodities Creates Angst

Fears concerning the credit markets was one of the contributing factors in yesterday's broad market selling. Keep an eye  on HYG and JNK going forward. HYG collapses -1.5% yesterday now at lows not seen for two years. The brown sideways channel through 83-89 is in play. Price stopped exactly at the 200-week MA support at 82.76 and will make a critical bounce or die decision. Note the tweezer top (red circle) in October of last year which ushered in the collapse from over 90 to 83.

The red lines show the double-top formation, overbot conditions and universal neggie d (red lines) for all the indicators so the top call in May was easy (red arrow). Price now makes a lower low compared to the August low and the stochastics and histogram are positively diverged wanting price to bounce for a week or three. The RSI, MACD line and money flow are weak and bleak (red lines), however, so price would be expected to roll over and print lower after any bounce occurs for a week or so.

About 15% to 25% of the high-yield instruments are exposed to the energy industry in some form and the ongoing low oil prices and commodity collapse is creating serious angst in the credit markets. Price may bounce in the very short term as discussed above (targeting the 83.7-84.0 gap) but lower lows should occur afterwards with the gap fill under 82 (pink circle) a downside target. 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.