{"id":19509,"date":"2022-03-14T07:30:41","date_gmt":"2022-03-14T11:30:41","guid":{"rendered":"https:\/\/www.jeffclarktrader.com\/?p=19509"},"modified":"2022-03-14T07:30:41","modified_gmt":"2022-03-14T11:30:41","slug":"this-ultimate-market-barometer-signals-a-rally","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/this-ultimate-market-barometer-signals-a-rally\/","title":{"rendered":"This Ultimate Market Barometer Signals a Rally"},"content":{"rendered":"

If you’re looking for signs of a stock market bottom, then pay attention to junk.<\/p>\n

High-yield bonds (a.k.a. junk bonds) are the ultimate barometer of investors’ willingness to take on risk.<\/p>\n

If the stock market is going to rally, then junk bonds will likely rally first. And, when the market is set to fall, weakness in high-yield bonds is often the “canary in the coal mine.”<\/p>\n

We’ve written about this relationship between junk bonds and stocks many times here in Market Minute<\/em>.<\/p>\n

The action in high-yield bonds tends to lead the action in the broad stock market by anywhere from two days to two weeks.<\/p>\n

That relationship should inspire some hope among the stock market bulls<\/a>. It looks like high-yield bonds are setting up for a rally.<\/p>\n

Take a look at this chart of the iShares iBoxx High Yield Corporate Bond Fund (HYG)…<\/p>\n

\"Chart\"<\/div>\n

HYG has been crushed this year.<\/p>\n

The fund is down almost 6% in two and a half months. That’s an enormous move for a bond fund. Investors have clearly been in “risk-off” mode, and HYG has been leading the stock market lower.<\/p>\n

But there are signs that this trend could soon change…<\/p>\n\n\n\n
\n

Free Trading Resources<\/strong><\/p>\n

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 \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

While HYG has recently fallen to a lower low, the various momentum indicators at the bottom of the chart (MACD<\/a> and RSI<\/a>) have made higher lows. This sort of “positive divergence” is often an early warning sign of a potential trend change from bearish<\/a> to bullish.<\/p>\n

This is the first time in this three-month-long decline phase that we’ve seen positive divergence on this chart.<\/p>\n

So, it’s likely telling us that a significant intermediate-term bottom is near. And if high-yield bonds start to rally, then a stock market rally shouldn’t be far behind.<\/p>\n

Traders should pay attention to the action in HYG this week. It’ll tell us whether or not stocks are ready to rally.<\/p>\n

Best regards and good trading,<\/p>\n

\"signature\"<\/p>\n

Jeff Clark<\/p>\n

<\/p>\n

Reader Mailbag<\/h2>\n

Have you traded junk bonds recently?<\/p>\n

Let us know your thoughts – and any questions you have – at feedback@jeffclarktrader.com<\/a>.<\/p>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

This trend could change soon…<\/p>\n","protected":false},"author":49,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ep_exclude_from_search":false,"service":"","footnotes":""},"categories":[1],"tags":[],"publication":[10],"person":[7],"newsletter-type":[],"ticker":[],"class_list":["post-19509","post","type-post","status-publish","format-standard","hentry","category-market-minute","publication-market-minute","person-jeff-clark"],"acf":[],"ai_tts_audio_outdated":false,"ai_tts_legacy_post":false,"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/19509","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/users\/49"}],"replies":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=19509"}],"version-history":[{"count":0,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/19509\/revisions"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=19509"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=19509"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=19509"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=19509"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=19509"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=19509"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=19509"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}