I argued that if the junk bond market decline continued, then it was only a matter of time before the stock market turned lower as well.<\/p>\n
Fortunately \u2013 for the stock market bulls, anyway \u2013 buyers jumped into the high-yield market at just the right time. High-yield bonds have rallied hard for the past couple of weeks. The iShares iBoxx High Yield Corporate Bond ETF (HYG) is back near its high of the year, which supports the new highs in the stock market. All is right with the world again.<\/p>\n
EXCEPT\u2026 the technical condition still looks dangerous to me.<\/p>\n
Look at this daily chart of HYG\u2026<\/p>\n
![](\"https:\/\/www.jeffclarktrader.com\/wp-content\/uploads\/2017\/11\/Screen-Shot-2017-11-29-at-11.23.49.png\")
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Two weeks ago, HYG was oversold. It was quite extended below both its 50-day moving average<\/a> (the blue line) and it 9-day exponential moving average<\/a> (the red line).<\/p>\n The rally since then has been quite strong. But all HYG has really done is come back up to test the 50-day MA as resistance.<\/p>\n This pattern is still bearish. HYG is below its 50-day MA. And the 9-day EMA is below the 50-day MA.<\/p>\n In order to turn the pattern to bullish, HYG and its 9-day EMA both need to cross above the 50-day MA. Until that happens, traders should stay on guard for another move lower in the junk bond market \u2013 especially since the weekly chart looks like this\u2026<\/p>\n On the weekly chart, HYG has broken down from a bearish rising wedge pattern. There was significant negative divergence on key momentum indicators like the MACD<\/a> and RSI<\/a>.<\/p>\n At the very least, this breakdown should lead HYG to test its 50-week moving average near $86 over time.<\/p>\n And that sort of decline in junk bond prices is likely to induce some selling pressure in the broad stock market.<\/p>\n Best regards and good trading,<\/p>\n Jeff Clark<\/p>\n P.S. <\/strong>Just yesterday in the Delta Report<\/em>, we closed a low-risk, high-probability option trade on Bed Bath & Beyond (BBBY) for a 136% gain.<\/p>\n That\u2019s no anomaly\u2026 We make trades like that often\u2014without chasing high-flying fad stocks or putting ourselves in needlessly risky situations. And it\u2019s all thanks to a technique I discovered 17 years ago<\/a>, near the peak of the dot-com bubble.<\/p>\n To learn about how I discovered it\u2026 and how I\u2019ll help you use it to capture those kinds of returns, click here<\/a>.<\/p>\n![](\"https:\/\/www.jeffclarktrader.com\/wp-content\/uploads\/2017\/11\/Screen-Shot-2017-11-29-at-11.25.30.png\")
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