Are Junk Bonds Sending a Bearish Message to Stocks?

Investors are constantly looking to gain an edge in the stock market.

A simple way to understand risk in the market is to follow high-yield bonds. They have higher risk, so when they do well, it’s a good sign for the market as a whole. And when they do poorly, it’s a bad sign for the market as a whole.

Note that I wrote “broader market.” That’s because recently we’ve seen a few stocks pull the market higher.

Looking at today’s weekly chart of the Junk Bonds ETF (JNK), we can see that JNK broke below support in December 2021 (bearish). And, as we all know, wrote recently aboutThe equal-weighted S&P 500 Index (RSP) has made little gain in the 30 months since the JNK collapse — the same is true of the equal-weighted Nasdaq 100 (QQEW).

Today, junk bonds could collapse again.

I humbly think it is worth keeping a close eye on them! Will this have an impact on market performance? Stay tuned!

JNK Junk Bonds ETF Weekly Chart

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The author may have a position in securities mentioned. The opinions expressed herein are solely those of the author and do not represent the views or opinions of any other person or entity.