This pattern usually leads to a breakdown – which would mean a selloff in the high-yield bond market. And, a selloff in junk bonds usually leads to a decline in the broad stock market.<\/p>\n
Here’s an updated look at the chart I first showed you three weeks ago…<\/p>\n
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For the past three weeks, HYG has been chopping back and forth in a tight trading range. It’s clinging just above the support line<\/a> of its rising wedge pattern.<\/p>\n This choppy action has caused all of the various moving averages to coil together. So, there’s a lot of pent-up energy available to fuel a big move.<\/p>\n And, it looks to me like that big move will be to the downside.<\/p>\n Yesterday’s 0.36% decline caused HYG to close below the support of all of its various moving averages. By itself, that’s not all that big of a deal. But, with HYG also threatening to break down from a bearish rising wedge pattern, yesterday’s decline could be an ominous warning for the junk bond sector.<\/p>\n It looks to me that if HYG closes below $86.20 anytime over the next few sessions, then we’ll have a decisive breakdown from that pattern and junk bonds will be headed lower.<\/p>\n And, if junk bonds head lower, then the stock market should follow close behind.<\/p>\n Best regards and good trading,<\/p>\n Jeff Clark<\/p>\n <\/a><\/p>\n Today in the mailbag, one reader responds to Jeff’s unusual Friday essay<\/a> with anger…<\/p>\n Really? The relationship isn’t working for you (with you being in the 1%)?<\/p>\n Taxes for the 1% have been slashed to the extent that some of you have openly stated they should be paying more to the system… Maybe they actually have a conscience.<\/p>\n Explain to me why you have any concern that Social Security has been robbed and that every step you take is monitored. Tell me to my face that the 1% is NOT responsible for where we’re at today.<\/p>\n The letter should have been signed “The 99%”… But we can’t go anywhere.<\/p>\n You have the luxury of living wherever you want whenever you want. You’re welcome… from the 99%. Now shut up and pay up. Seriously disappointed.<\/p>\n – Darcy<\/strong><\/p>\n<\/blockquote>\n While others felt differently…<\/p>\n Great essay. Learning American history at home has made my oldest daughter (the one who sent you a letter on dancing in the street in Italy like your son<\/a>) shed tears at times. So sad!<\/p>\n She gets release from the depressing state of our country by spending hours daily listening to Ben Shapiro and Andrew Klavan on The Daily Wire<\/em>. I sent her this piece. She will appreciate your thoughts.<\/p>\n![](\"https:\/\/casey-assets.s3.amazonaws.com\/images\/misc\/jeff-clark-signature.png\")
<\/p>\nReader Mailbag<\/strong><\/h2>\n
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