This Chart Shows Why You Shouldn’t Bet on a Crash

Here’s why betting aggressively on the downside right now is probably a mistake. [Jeff Clark's Market Minute]( This Chart Shows Why You Shouldn’t Bet on a Crash By Jeff Clark, editor, Market Minute It’s too early to bet on a stock market crash. There’s nothing wrong with being cautious. And there’s nothing wrong with trimming some long positions and raising some cash. We’ve suggested as much over the past few weeks here in Market Minute. But betting aggressively on the downside right now is probably a mistake. Recommended Link [Elon Musk’s Favorite AI Stock?]( [image]( Forget Nvidia, Microsoft or Google. Our tech expert and venture capitalist Luke Lango believes [this is Elon Musk’s favorite AI stock.]( Why? Because this company is supplying Elon Musk with a key piece of advanced tech for his new AI venture. [Click here to see the details.]( -- Yes, stock valuations are stretched. Yes, we’re in the seasonally weak period of September and October. And yes, there’s a bunch of political chaos that could add uncertainty to the financial markets. But until the high-yield bond market breaks down, the stock market isn’t going to crash. High-yield bonds are a leading indicator for the stock market. When “junk” bonds are rallying, it’s a risk-on environment. That tends to be bullish for stock prices. When high-yield bonds are falling, investors are in a risk-off mode. That’s bearish. And the iShares iBoxx High Yield Corporate Bond ETF (HYG) has been climbing higher since April. Here’s the chart… [chart] [(Click here to expand image)]( I don’t see anything bearish in this chart. HYG is trading above all of its various moving average (MA) lines. And those MAs are in a bullish configuration – with the 9-day exponential moving average (EMA) trading above the 20-day EMA, and the 20-day EMA above the 50-day MA. If the stock market was setting up for a crash, then the chart of HYG would be leading the way lower. But that’s not happening… yet. Free Trading Resources Have you checked out Jeff's free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career – at zero cost to you. Just [click here]( to check it out. The action in the junk bond sector suggests last week’s decline in the broad stock market was nothing more than a short-term dip. Traders, though, should keep an eye on junk bonds for the next few weeks. If HYG starts to break down and lose the support of its MAs, then we’ll be setting up for a more significant decline in the stock market. That will be the time for traders to add short exposure. It will happen at some point… just not right away. Best regards and good trading, [Signature] Jeff Clark Editor, Market Minute [Jeff Clark's Market Minute]( Jeff Clark Trader 55 NE 5th Avenue, Delray Beach, FL 33483 [www.jeffclarktrader.com]( To ensure our emails continue reaching your inbox, please [add our email address]( to your address book. This editorial email containing advertisements was sent to {EMAIL} because you subscribed to this service. To stop receiving these emails, click [here](. Jeff Clark Trader welcomes your feedback and questions. But please note: The law prohibits us from giving personalized advice. To contact Customer Service, call toll free Domestic/International: 1-800-752-0820, Mon–Fri, 9am–7pm ET, or email us [here](mailto:contactus@jeffclarktrader.com). © 2024 Omnia Research, LLC. All rights reserved. Any reproduction, copying, or redistribution of our content, in whole or in part, is prohibited without written permission from Omnia Research, LLC. [Privacy Policy]( | [Terms of Use](