LQD trade ideas
Short High Yield Corp BondsCredit markets are looking rather frothy today; might be time to grab a life jacket and get out. Bear in mind that junk bonds also have a high directional correlation to the equity markets. Take heed.
LQD, A Leading Indicator for EquitiesLQD is an ETF that tracks investment grade corporate bonds.
www.ishares.com
In this study I compare the LQD with SPY that tracks S&P 500 index. Upon review of turning points one can conclude that the corporate bonds start to go down first and recover first hinting the broader market direction.
04/07/2019
US Bonds vs US Stocks - Money Coming Back into Bonds?From a quick look at the US Bonds (LQD as a proxy) and US Equities (SPY as proxy) price ratio, it seems like money is moving slowing moving back into bonds at the moment. This is most likely due to the poor global economic data that has come out in recent weeks.
Time will tell as to whether or not this trend continues. But for now, bonds seem to be the asset of investors’ choice.
The end is Near $lqd $spy $tltI don't just mean for Investment grade bonds. This will have a profound impact on $spy as well.
Co's have been borrowing cheap to buy back stock and issue dividends. This manufactured earnings
era will come to an end. Without buybacks, the market will struggle. We will see a recession again,
probably withing 12-18 months. How much forward demand has been pulled forward? Watch this one closely
Trying out My Think or Swim Breakout Scan Consolidating, Bollinger Breakout, Volume Increase- We Shall See....
LQD Credit deteriorating /- just a rough idea, if credit started to widen and back to 2016 level .. SPX still a lot more room to dive
- it will be more than systematic issue if credit get worse
- Bull has to fix the market asap as both LQD/HYG is nosediving now
iShares iBoxx $ Investment Grade Corporate Bond ETFTrade carefully. Looks like bond will follow the new parallel channel. I marked then as LIGHT GREEN Lines. Also a dotted red line incase any one of u want 2 short safely. I would like to wait for few months or weeks till the price breaks the deep green line and then hits the lower channel light green line to go long. But if the lower green support line has been broken then its a time to short. But for now remaining neutral.
LQD - RSI DIVERGENCERSI divergence on the weekly chart points to a future bearish movement. Previous bullish RSI divergences worked well to predict an incoming uptrend
LQDI will wait for some pullback to consider going long on bonds to hedge stocks in case the market situation gets worse
Corp Credit SpreadsGetting nervous yet? Spreads contract, equities typically run higher and vice-versa. Well, spreads have been expanding and yet equities have surged higher. Small caps have not participated like the SP500. Perhaps one is lying? "Long" spreads expanding. Some reading from the NBER National Bureau of Economic Research: Credit Market Shocks and Economic Fluctuations: Evidence from Corporate Bond and Stock Markets
To identify disruptions in credit markets, research on the role of asset prices in economic fluctuations has focused on the information content of various corporate credit spreads. We re-examine this evidence using a broad array of credit spreads constructed directly from the secondary bond prices on outstanding senior unsecured debt issued by a large panel of nonfinancial firms. An advantage of our "ground-up'' approach is that we are able to construct matched portfolios of equity returns, which allows us to examine the information content of bond spreads that is orthogonal to the information contained in stock prices of the same set of firms, as well as in macroeconomic variables measuring economic activity, inflation, interest rates, and other financial indicators. Our portfolio-based bond spreads contain substantial predictive power for economic activity and outperform---especially at longer horizons---standard default-risk indicators. Much of the predictive power of bond spreads for economic activity is embedded in securities issued by intermediate-risk rather than high-risk firms. According to impulse responses from a structural factor-augmented vector autoregression, unexpected increases in bond spreads cause large and persistent contractions in economic activity. Indeed, shocks emanating from the corporate bond market account for more than 30 percent of the forecast error variance in economic activity at the two- to four-year horizon. Overall, our results imply that credit market shocks have contributed significantly to U.S. economic fluctuations during the 1990--2008 period.
IG vs HY credit spread. Moves higher in times of stress.INVESTMENT GRADE VS. HIGH YIELD (JUNK) CREDIT SPREAD
Bottom was around start of taper
