Why You Should Pay Attention to Junk Bonds Right Now

High-yield bonds (a.k.a. junk bonds) are a great gauge for investors’ willingness to take on risk. [Jeff Clark's Market Minute]( Why You Should Pay Attention to Junk Bonds Right Now By Imre Gams, analyst, Market Minute High-yield bonds (a.k.a. junk bonds) are a great gauge for [investors’ willingness to take on risk](. That’s why Jeff Clark says that a move in junk bonds is often a leading indicator for the stock market. If stocks are set to move higher, junk bonds will usually rally first. The same thing happens the other way around. A fall in junk bonds often precedes a sell-off in stocks. That’s why what’s happening in the junk bond market right now is so fascinating... Recommended Link [The only stock to keep (revealed below)]( [image]( Jeff Clark has been trading stocks for nearly 40 years. He knows the market. He predicted the crashes of 2008, 2020, and 2022. He’s helped his readers avoid huge losses… And still had 13 gains last year alone. He’s done it by avoiding 99.9% of all stocks… Only trading this one, [revealed in this video above.]( Now Jeff is helping his 23-year-old son overcome his huge losses in crypto and tech stocks… By using this same method. [Watch how he plans to win back all of his son’s losses with this one ticker revealed here.]( -- Junk bonds, as measured by the iShares iBoxx High Yield Corporate Bond Fund (HYG), have been chopping sideways for over a year. The range in HYG has been quite narrow as well, with prices unable to break beyond a 10% move either up or down since late 2022. This kind of trading pattern is just like water heating inside of a kettle. Eventually, the water’s going to boil, and all that steam will have to escape. After a period of long consolidation, the market will eventually have to break out in one direction or the other. The longer the consolidation, the fiercer the breakout. This sideways pattern in HYG is in sharp contrast to what we’ve seen in the stock market. The Nasdaq 100 index is up around 45% year-to-date, while HYG is only up 2.10% year-to-date. This is an unusual divergence between two markets that are typically closely correlated. Something will have to give sooner or later. Either junk bonds will have to catch up to stocks… or the stock market rally is going to fall apart. Let’s look at a price chart of HYG to see if it offers any clues as to which way the markets will break… HYG has been trading in a sideways triangle pattern since June 2022 (blue lines). Triangles are almost always trend continuation patterns. They consist of two trendlines that funnel price action into a point called the apex. The apex of a triangle is where a breakout is most likely to occur. 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. As you can see, HYG is trading quite closely to that apex right now. Prior to trading within this triangle pattern, HYG was in a significant downtrend that started in September 2021. This means it’s likely once the triangle pattern breaks out, it will lead HYG to lower prices. The key level keeping the triangle pattern together is the February 2 high of $77.20. If HYG breaks above this level, then it would invalidate the entire pattern, and would mean having to go back to the drawing board. On the other hand, breaking below the supporting trendline of the pattern would be great initial evidence that the triangle has completed and HYG is ready to start selling off. Happy trading, Imre Gams READER MAILBAG Have you been following along with the bond market? Let us know your thoughts – and any questions you have – at feedback@jeffclarktrader.com. IN CASE YOU MISSED IT… [New Cash Law Will Be Disaster for Savers]( New law has expert warning seniors and retirees to beware. There's a darker truth behind this political event... [Read The Full Story Here.]( [image]( [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). © 2023 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](