\tWe got that breakdown on Tuesday. The iShares iBoxx High Yield Corporate Bond Fund (HYG) closed below its 50-day moving average<\/a> (MA). The sector now looks ready to roll over. Here’s a look at the daily chart…<\/p>\n \t \tSimilar breaches of the 50-day MA back in March and August led to steeper declines in HYG and coincided with pullbacks of nearly 2% in the S&P 500.<\/p>\n \tThis time, however, the market might be headed for a larger decline.<\/p>\n \tYou see, it’s not the action on the daily chart of HYG that concerns me the most. It’s the look of the weekly chart…<\/p>\n \t \tFor the past year, HYG has been forming a bearish rising wedge pattern on the weekly chart. There’s significant negative divergence on key technical indicators like the MACD<\/a> and RSI<\/a>.<\/p>\n \tThis sort of pattern usually breaks to the downside. And, since this is a weekly chart, any downtrend is likely to take several weeks to play out – as opposed to the quick selloffs we saw in HYG back in March and August.<\/p>\n \tAs you can tell from the chart, HYG closed below the support line of the rising wedge pattern on Tuesday. It’s also below its 9-week exponential moving average<\/a> (EMA). That’s bearish.<\/p>\n \tOf course, this is a weekly chart. So, if HYG can rally back above the support line and the 9-week EMA by Friday, then it can avoid a breakdown – for now.<\/p>\n \tBut, if HYG finishes the week in this current condition, then the junk bond sector is likely headed for an intermediate-term correction.<\/p>\n \tAnd if junk bonds are selling off, then the stock market won’t be far behind.<\/p>\n \tBest regards and good trading,<\/p>\n \tJeff Clark<\/p>\n \tIn today’s mailbag, we hear from a trading veteran with a key piece of advice…<\/em><\/p>\n \t\tI am 82 years old and have lived through all the economics of the past 50-plus years. The primary lesson I've learned? Beware of greed and fear!<\/p>\n \t\tEvery financial writer has carefully researched his subject and can list numerous charts and figures to support his recommendation. It’s all sounding like the next “HOT” thing.<\/p>\n \t\tBeware of following when you feel greed or fear. They will almost always lead to loss. ‘Nuff said!<\/p>\n![](\"http:\/\/assets.jeffclarktrader.com\/ee-assets\/channels\/articles\/171109-mm-chart-01-ghs752.png\")
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<\/div>\n \tReader Mailbag<\/strong><\/h2>\n
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