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HYG trade ideas

Credit Spreads Narrowing = Good for EquitiesThe Junk / 20 Year Bond Ratio is showing early signals of continued if not increased appetite for stocks as an asset class. For anyone not familiar with this ratio, we're looking at HYG/TLT (or HYG/IEF which is also showing the same signs). In short here's what it means for you and me: Falling Ratio = Credit Spreads Rising (bad for stocks) Rising Ratio = Credit Spreads Narrowing (good for stocks) Go back through any bear market or even just prolonged periods of consolidation and you will see this ratio hold true. When Stocks are showing risk appetite, we want Bonds (specifically credit spreads) to confirm. A rising spread between Junk and Government bonds helps confirm risk appetite for Stocks, and we are even seeing signs here that the ratio is breaking out of a nice base. If the ratio falls back below the .69 area, that negates this thesis and we will re-evaluate as it could have broader, negative implications for the market. For now, we have 2 initial upside targets at .82, then .92. As these targets are hit, we can expect stocks as an asset class (especially reflected in the indexes like the S&P 500) to consolidate or selloff a bit. This also means the bout of selling we saw last week and potentially more in the coming weeks is a nice buying opportunity for long term holdings, but also for setups in short term trades and options plays. The selloff in bonds, at least for now, is not a worrying sign from a structural market perspective. Stay patient, dedicated, and focused out there.
AMEX:HYGLong
by TheSessionMaker
1
Divergence Between HYG and DOW Presents A DOW Short OpportunityThe breakdown in HYG even as the DOW is making new highs suggests a divergence that can only be reconciled with a correction in the DOW. Note the extremely high volume in the down days for HYG, which serves as a confirmation on the downside. If the FED really does raise the Fed Funds Rate in December (which I think to be unlikely), we will see another steep decline in the DOW ala Jan 2016. In the past week, the emerging markets (use of SCHE as a proxy in orange) are showing signs of distress with the threat of a FED hike looming and a stronger USD. If this continues, the DOW will not be able to escape the pull of gravity.
AMEX:HYGShort
by Regnevathe2nd
Is $HYG leading $SPY Lower? Pt.2There is no question that credit markets have been distorted for a long-term, but, fortunately, if you are in tune with what is going on it help get you out of the way of a steam roller. High-yielding junk debt has been a huge trade this year as investors continued to seek yield despite valuations and a clear crowed trade. The chase for performance also led investors to pile into corporate debt as the "safer" alternative to junk and grossly negative European debt. Unfortunately, the tide has been turning and investors are beginning to pay for it. Junk debt has seen six consecutive days of declines as flows continue to come out of these exchange-traded funds like HYG, seeing a single-day record outflow of nearly $1B, and JNK. There also has been little coverage on the corporate side, but capital is also bleeding. twitter.com And we are witnessing some troubling signs that could cause spreading implications to broader markets. Nearly a year ago, 361 days to be exact, my " Is HYG leading SPY Lower " pointed out a pivotal point for markets. In less two months later we saw junk yield spreads absolutely blow out to over 1,000 bps and stocks saw the worst start to the year ever. With a combination of a highly anticipated Federal Reserve rate next month hike and slowing growth (sound familiar?) volatility has been insidious. Technically, the price action near-term is oversold but over the course of the next couple months that will likely not matter, we could see a January 2016-like selling spree as uncertainty creeps up. On a longer-term perspective,, HYG has been trading within a HUGE triangle, and lower support will be tested! The near-term trend broke, and today's price action is seeing some support on the 200-day EMA. The momentum is gaining quickly with the ADX-indicator popping from 10 to 15, while topping 20 will indicate a substantial price trend. From my previous note last November, we saw momentum gain from 17 to top at 48. Even if Janet Yellen backs away from hiking rates (which will cause a mutiny on her hands), the strength of the DXY on the back drop of slow, grinding-lower growth will put continued pressure on junk bonds. Furthermore, as with last November, we see lower crude oil from here; and this will undoubtedly cause concern for high-risk shale producers. Trend cautiously. HYG at $70 is our 6-month target. If you want to learn more follow @Macro_View on TWTR and go to macroview.co to get on our waiting list to subscribe.
AMEX:HYGShort
by MacroView_Research
Short book: HYG - Topping patternToday we added a couple shorts, I'm posting the trades we currently have open but not providing entry/stop suggestions. Only trade them if you have a trading strategy, or, ask me if you're interested in learning more about the one we use (Tim West's 'Key Hidden Levels' and 'Time at mode'). We have some worrying bearish signals, so it's a good idea to have a market neutral position, picking stocks to short, while still looking for longs in undervalued companies. See related ideas for the rest of the trades we took. You may still be able to join them or wait for a secondary entry when/if we decide to add to them. Good luck, Ivan Labrie.
AMEX:HYGShort
by IvanLabrie