HYG/IEI, a proxy to inverse Credit SpreadHYG/IEI, high yield bond vs 3-7 year treasury.
Still near new high, no significant credit risk yet. Until we start to see this indictor turning down and break support line, Small caps should be holding up.
HYG trade ideas
$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.
HYG broke its' 200 mda - RUT is following HYG downHYG broke its' 200 mda - RUT is following HYG down. RUT will likely follow it through the 200mda unless the Plunge Protection Team at the Federal Reserve comes to save it.
Bull Flag with Corporate BondsCorporate Bonds continue in their Bull Flag Channel. Bond market keeps telling us that the Fed cannot remain higher for longer. Not sure on timing, however, it wouldn't surprise me if we see the Fed reverse course in the some what near future.
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.
High Yield Vs TSYThis comparison of High Yield (via $HYG) against TSY of similar maturities ($IEI). As the ratio starts to turn down, market gravitates towards risk off environment. Notice how it touches the trend line but doesn't break thru it.
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 daily bullish hammer above 100 day moving averageHYG daily bullish hammer above 100 day moving average if we break above we can run into 200
$HYG setting up for a H&S breakdown? Corporate bond blowup?$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.
HYG daily frame intermediate C in progressdaily frame....minor 1 completed with minor two starting towards 75
HYG TRIANGLE. Wave D low is NOW rally in wave E of B HYG hourly chart TIME is running OUT for the rally in SPY QQQ I have now moved back to 100 % cash sold the 75 % net long at 4144
HYG TRIANGLE. Wave D low is NOW rally in wave E of BThe chart is what I have felt is the most important chart to watch for sometime . We rallied and stopped right at the trend line . I have watching this as to it will become an issue for the sp 500 going forward . best of trades WAVETIMER
Always Watch The Junk Bonds. Six Sigma Bubble Is About To Fall..Flashing big warning signs. You guys need to be really carful. All the gains can get wiped out in just a few days. Covid is proof where most stocks got halted while the prices are dropping like a stone.
SPX: Credit Spreads add to the Bullish Thesis Orange Line = SPX
Blue Line = HYG/IEI = High Yield/U.S. Treasury Bonds
Strong Correlation between HYG/IEI and SPX.
Ascending Triangle pattern for HYG/IEI indicates more upside --> SPX to the moon.
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.
$HYG is recent breakout another trap?Nice breakout for junk bonds but had similar move before more weakness in last market downturn
One More Leg Up? Long SPXBonds are giving us the signal that good times are on the horizon. This signal (bond equity divergence) has been my favorite signal this year, and I am hoping it continues to remain fruitful. I would not fade this indicator! Going long up here seems scary, but this gives me confidence that I didn't miss the final big move down :)
Rolling (IRA): HYG November 18th 69 to December 16th 69... for a .35/contract credit.
Comments: With the November 18th 69 converging on .10, rolling it out for a credit about equal to the monthly dividend. Total credits collected of .42 (See Post Below) plus the .35 here for .77 ($77) per contract.
Smart money vs dumb money divergencesAs you can see, when there is a divergence between these too charts the charts tend to go the way that Smart Money predicts.
Currently we havent made a higher high on the smart money while dumb money has, this can still happen but i think caution in the market is required.
