Junk Bonds on Bounce?The High Yield Corporate Bond ETF AMEX:HYG is a widely watched risk sentiment gauge, as seen within the renowned "Fear and Greed Index," and closely tied to credit conditions and investor appetite for riskier debt. It reflects how much confidence the market has in lower-rated corporate borrowers—making it a strong proxy for broader risk-on/risk-off shifts.
Technically, HYG looks like it may have completed a five wave impulsive structure from the 2022 lows, followed by an ABC correction that found support near 75.60. That (C) leg could mark the end of the correction, especially with recent price action holding above Kumo cloud support on lower timeframes, hinting at a potential reversal or at least stabilization.
Fundamentally, there’s a lot in flux. Inflation is still sticky, which has kept the Fed cautious on any immediate rate cuts. At the same time, tariff talk targeting Chinese imports rekindled fears of trade friction and margin compression—especially for leveraged companies. Credit stress is also rising, with default rates ticking up in weaker sectors like consumer credit and commercial real estate.
The silver lining for bulls: the U.S. dollar has recently pulled back, easing pressure on corporate borrowers and global funding conditions. A weaker dollar can be supportive of high-yield credit as it reduces debt servicing burdens, especially for firms with dollar-denominated liabilities.
Junk bonds are approaching a pivotal level. A clean break above the $78 would strengthen the case for a bullish reversal and a new impulsive phase. But if resistance holds and price rolls over, it may warn that markets aren't out of the woods yet. In any case, HYG remains a powerful gauge within the market’s risk engine.
HYG trade ideas
Junk Bonds: Risk Appetite Bounces on Support!Junk Bonds: Risk Appetite on Support!
Credit markets have been buzzing — headlines warn of record outflows and panic rotation. But AMEX:HYG , the high-yield bond ETF, just told a different story.
What is AMEX:HYG ?
It tracks “junk bonds” — loans to companies with weaker credit. They offer high yields, but carry high risk. When investors are confident, they chase these. When fear hits, they dump them — fast.
The Chart Setup:
We've just seen a clean rebound off 75.72 — a long-standing “fear line” going back to:
• 2008 GFC lows
• Covid crash in 2020
• And now, 2025 macro tension
Zooming into the 1H chart (see inset), the rebound off 75.72 was sharp and orderly — not panic-driven.
Why it matters:
📉 Last week: $9.6B exited junk bond funds (20-year record)
💣 AMEX:BKLN saw its biggest outflow ever
But technically? This support is still holding .
The message:
The market might be pricing fear — but not full-blown stress .
Break below 75.72? That changes everything.
Watchlist:
• AMEX:BKLN – leveraged loans
• AMEX:LQD – safer credit rotation?
• NASDAQ:TLT – treasury flow = fear gauge
• CRYPTOCAP:BTC 🟧 – Bitcoin as macro hedge again?
For now, risk appetite is hanging on by a technical thread. Let’s see if it holds.
One Love,
The FXPROFESSOR 💙
ps. things can change fast so we will monitor..alerts are ON
IF you are Bearish SP 500 Your EARLY The chart posted is That of High yield Market ETF HYG we have just finished of the correct in this sector and should see Liquidity coming back into assets One Last Gasp This should raise mags qqq and spy toa new record high as most other indexes struggle to rally back to .618 best of trades WAVETIMER
$HYG will get a boost this summer when rates are cut due to BOJI see the BOJ dumping treasuries this summer, which'll force down the USDJPY pair, and increase inflation here at home. When rates go down, borrowing money is easier, especially for junk corporations avoiding default due to decades high interest rates.
Could AMEX:HYG fall back into the box one last time? Absolutely, if the dollar ticks higher after FED hawkishness. But then, AMEX:HYG will catapult.
When HYG is ready I'll give out some options plays to capitalize on the bullish trend.
I trade options and this is by far the best place to be for 2024I trade options so I look for the cheapest way to make the most amount of money. The most Delta for the least Theta. Last year it was MSTR, this year it is HYG and JNK. Record short positions on HYG started in March 2023 and it still continues today.... for example there are 20,000 puts on HYG expiring this Friday the 29th and 1370 puts.... that's a P/C of 14.54/1
Max Pain on JNK the week of 1/19 is 104, that implies a 10% move in junk debt in just 4 weeks, this would be insane. I wanna be apart of that and I am closing all other options trades I have except my ARKK Calls and playing this.
1800 HYG Calls $79 March 15th cost $79,000
1000 JNK Calls $96 March 15th Cost $78,200
I will update when closed
HYG and why it matters
High yield corporate bonds show a significant correlation with the risk-on/risk-off sentiment for the S&P 500 (SPX). As we can observe, the current market structure resembles a wedge, which can technically serve as both support and resistance.
To add complexity, we're currently at a channel resistance level, which also happens to be a historic trendline. This trendline has consistently been respected and traded in markets experiencing changing sentiment.
It's becoming apparent that several factors are aligning for the upcoming months when you consider these various charts. This confluence of technical indicators and historical patterns suggests that careful monitoring of these charts is essential as they could provide valuable insights into market movements in the near future.
HYGThe high-yield market (HYG)
High yield and stocks are normally highly correlated and the HYG ETF often acts as a barometer for strength in the Stock market..
As you can see things have gotten tight here in the pennant and HYG not surprisingly has chopped around just like the Spy.
Bears will see a H&S
Long only over 75 (Weekly 50sma)..
Short under 74.00 (Supporting trendline
Bollinger band on the 4hour has gotten tight implying a big move coming . We'll know bu Tuesday the direction
$HYG setting up for a H&S breakdown? Corporate bond blowup?$HYG looks like it's about to fall.
There's a H&S pattern forming on the 4Hr timeframe and price just rejected the 200DMA.
Should price break support at $73.05, I think we'll see a quick move down to the $69 region, maybe even lower.
I've taken some puts just incase this plays out.
Even if we cannot believe it: HYG signals apx10% move of S&P 500HYG has made an inverse H-S-H pattern with an upward potential of approx. 10%, if the current break-out of its neckline is sustainably confirmed. In case this confirmation comes, we will have a valid confirmation of another bullish move of the S&P 500 towards 4400 points. Good to watch out and not to become bearish too early without enough evidence.