So, you need to be able to spot when the shift is happening. And the best way to do that is to pay attention to what’s happening in the high-yield bond market.<\/p>\n
In a “risk-on” environment, high-yield bonds lead the market higher. When conditions switch to “risk-off,” these bonds lead the market lower.<\/p>\n
The iShares iBoxx High Yield Corporate Bond Fund (HYG) has been running sharply higher for the past few weeks. But, the momentum has started to cool off a bit lately. HYG has been consolidating for the past several days.<\/p>\n
The chart has been building energy. And, HYG looks set to make a big move, in one direction or the other, within the next few days.<\/p>\n
The direction of that move will tell us a lot about whether we’re still in “risk-on” mode, or if we’ve shifted to “risk-off”.<\/p>\n
Take a look at this chart of HYG…<\/p>\n
![\"Chart\"](\"https:\/\/cdn.jeffclarktrader.com\/JMU\/images\/202006\/20200624-jmu-01_aqw331.png\")
<\/div>\nThis chart has formed into a tight, consolidating triangle pattern. HYG is approaching the apex of the triangle and is going to break out of the pattern – one way or the other – within the next few days.<\/p>\n
If HYG breaks lower, then that will signal a shift towards “risk-off.” The stock market in general, and the high-flying stocks in particular, will likely follow HYG lower and we’ll probably get the pullback I’ve been warning about for the past several weeks<\/a>.<\/p>\n On the other hand, if HYG breaks out to the upside of this pattern then it’s “RISK-ON BABY!” In that case, the rally isn’t finished yet, and momentum traders can keep playing.<\/p>\n We should know, one way or the other, within the next few days.<\/p>\n Best regards and good trading,<\/p>\n Jeff Clark<\/p>\n P.S. <\/strong>My colleague Teeka Tiwari, like me, is familiar with the “double-edged sword” in the markets. In a “risk-on” environment, we still need to heed caution and try to spot potential pitfalls…<\/p>\n You see, Teeka recently discovered a strange kind of “behavior” that billionaire traders use to get one over on the little guy. And, through his research, he’s found a way for everyday traders to gain an edge from this same pattern<\/a>.<\/p>\n Tomorrow, June 25, at 8 pm ET, Teeka will be holding a special briefing to share these findings with you. Don’t miss out, and click right here to join<\/a>.<\/p>\n Have you been following the momentum trades for the past few weeks? Or are you, like Jeff, staying cautious until the market’s direction becomes clearer?<\/p>\n![\"\"](\"https:\/\/casey-assets.s3.amazonaws.com\/images\/misc\/jeff-clark-signature.png\")
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