|Day's Range||5.20 - 5.20|
The gyrations in Tesla are reminiscent of the tech bubble of the late 1990s and the silver debacle of 1980. Equally troubling: PIK securities are back.
The iShares iBoxx $ High Yield Corporate Bond ETF (HYG A) has been a decent performer, but charts say the largest high-yield corporate bond ETF could soon be facing some important technical tests.
The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) has been a decent performer, but charts say the largest high-yield corporate bond ETF could soon be facing some important technical tests. Income-minded investors have plunged back into junk bonds in search of yields as rates declined in response to heightened demand for safety and the Federal Reserve’s looser monetary policy outlook. “Schaeffer's Senior Options Strategist Bryan Sapp just pointed out that the HYG is trading near a trendline of higher lows that has proven to show when it's a good time to go long stocks,” according to Schaeffer's Investment Research.
While yields on junk bonds are at record lows, speculative-grade debt and high-yield bond ETFs have seen overall maturities shrink, which have caused some to see value in this segment of the fixed-income market.
While yields on junk bonds are at record lows, speculative-grade debt and high-yield bond ETFs have seen overall maturities shrink, which have caused some to see value in this segment of the fixed-income ...
Junk yields might look good compared with 10-Year Treasuries. But once investors subtract out the possibility of rising losses on defaults and factor in fees, high-yield holdings have a treacherously thin cushion.
PennMutual provides a look at seven major exchange-traded funds, ETFs, which track everything from stocks to gold to emerging-market debt, to gauge how expensive liquidity can get during a crisis.
Individual investors often hear the phrase "priced into the market." Analysts or advisors casually mention that "X" or "Y" factor has already been "priced into the market," but what do they mean?Source: Shutterstock On the surface, they are saying that the value of some fundamental factor has already been included in the price of a stock index like the S&P 500.For example, let's say that early indicators were all pointing to a really good retail sales number for the fourth quarter. No one is going to wait until the actual results are released to buy the best retail stocks. They may even pay a little extra.InvestorPlace - Stock Market News, Stock Advice & Trading TipsThe frustrating part of this phenomenon is that because the factor being "priced in" will happen in the future, no one knows for sure what its real value will be. Instead, we have to make guesses and estimates. The Future of the Trade DealSometimes, investors get too excited about a future event. They price in too much extra value before a big announcement. This is a common problem during earnings season. It's one of the reasons stocks are much more likely to move more than 10% to the downside after companies release earnings than they are to move more than 10% to the upside.The ambiguity around accurately pricing in a future event means we have to consider the risks of something being overpriced -- or even worse, the possibility of an event or announcement not happening at all.This is the issue that tripped up the market this week. Investors (including us) had been expecting more good news about the U.S.-China trade war and the release of a short-term deal. Therefore, we can assume that much of the value of that deal was already priced into the market.However, on Monday and Tuesday, President Donald Trump threw cold water on investors' expectations. He suggested he would be willing to wait until after the 2020 election for a deal with China. Plus, he announced the potential for reinstated tariffs on U.S. trading partners Argentina and Brazil.This morning there were a few more "official rumors" that indicated that talks are still on track, but the damage has already been done. Markets ReactAs you can see in the following chart, the Dow Jones Industrial Average pulled back to short-term support. The Russell 2000 performed similarly, while the S&P 500 did a little better as investors bought large-cap stocks off the lows on Tuesday.Source: TradingView Risk indicators like the CBOE Volatility Index (VIX), long-term Treasury bond yields and gold were also signaling stress following the trade developments.The issue isn't that the trade war is bad for market returns -- we already knew that. The problem is that investors have already included some of the value of a resolution to the trade war in current prices. If the president pops the bubble of hope, sellers may hit the market hard. No Need to Adjust Strategy YetOur goal in this week's update is to explain why volatility spiked and why it is difficult to put a precise value on the potential damage. Now that we have discussed the recent volatility, we want to explain why we don't think it is time to change the strategy just yet.We have been saying this for a while, but we still believe that, if for no other reason than political expediency, a short-term resolution to the U.S.-China trade war is more likely than not.However, there are a few places we recommend watching for some early warnings signs that traders may be heading for the exits. China's IndexesSource: TradingView China's stock indexes are prone to selling frenzies and are a good leading indicator that the most skittish investors are starting to sell.In the following chart, you can see that the Hang Seng (a Hong Kong stock index primarily made up of companies in the People's Republic of China) is flirting with a "head-and-shoulders" bearish reversal pattern. If it breaks, we would expect prices to drop in North America as well. High-Yield BondsSource: TradingView High-yield bond funds are a great indicator for emerging selling in the market. High-risk bond investors tend to lead the market to the downside.As you can see in the following chart, the iShares High Yield Corporate Bond ETF (NYSEARCA:HYG) is nearing a short-term support level and has been forming a bearish divergence on the Moving Average Convergence Divergence (MACD) indicator since September's highs.Clearly, there is some weakness in this asset class that we should watch, but we don't need to get overly concerned until HYG actually breaks support. The Bottom Line on the Trade DealThis week's volatility is frustrating because it is hard to quantify. It's being imposed on the market by an external factor -- politics. This will put traders more on edge if we see more bad fundamental news.For example, the Bureau of Labor Statistics will release the employment numbers for November on Friday. If the number of new jobs is lower than expected or wage growth is too slow, investors may use that as a trigger to sell.We will keep you updated as the news comes in.John Jagerson & Wade Hansen are just two guys with a passion for helping investors gain confidence -- and make bigger profits with options. In just 15 months, John & Wade achieved an amazing feat: 100 straight winners -- making money on every single trade. If that sounds like a good strategy, go here to find out how they did it. John & Wade do not own the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Retail Stocks to Buy That Dominated Thanksgiving Shopping * 6 Manufacturing Stocks to Buy as the Economy Recovers * The 7 Best Cryptocurrencies to Buy as Blockchain Heats Up The post Trade Deal Negativity Could Pop Investors' Priced-In Optimism appeared first on InvestorPlace.
Inflows largely track the trajectory of interest rates: when rates fall, investors have more incentive to hunt for yield.
Income investors today can target yields from several types of dividend ETFs that go well beyond straight-up income stock investing.
By Mike Merson, managing editor, Market MinuteSource: Shutterstock For the past three weeks, the market's been all risk, all the time.The Dow, Nasdaq, and S&P 500 have all made blowout moves to new highs. Hopes for a China trade deal propelled the move, of course. Just as it has for the past two years…InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 7 Stocks to Buy With Great Charts But if you ask me, none of this feels right. Stocks are heavy right here. Trading momentum is drying up. The price of stocks just isn't lining up with how traders are behaving.So, no matter what happens with the China trade deal, I think we're setting up for one massive sell-on-the-news situation.If you're not positioned for that now, you may not have a better chance. And one familiar chart tells the whole story…The high-yield bond sector is something every trader should watch every day. It's a fantastic market-leading indicator. And a great signal for trading opportunities.That's because high-yield bonds are the most direct way to see the risk appetite of the market. If "smart money" traders (who tend to trade bonds) are piling into junk debt, that risk-on attitude will soon spill over into the broad market, where the "dumb money" trades. The "smart money" move leads the "dumb money."Now, take a look at this chart of the iShares iBoxx High Yield Corporate Bond Fund (HYG)…The first, most pronounced thing to note is the extreme divergence on the MACD momentum indicator. For the latter half of the year, the price of HYG has risen while the momentum has shriveled up. This sort of action tends to lead to significant downturns… And the more extreme the divergence, the more severe the downturn.The divergence that occurred between July and the end of September resulted in a 1% drawdown for HYG. (You might scoff at that… until you realize that move preceded over a 3% drawdown in the S&P 500.)Also note that HYG just formed a "lower low" on the chart. And that's after a number of lower highs since the peak in late October. This signals the trend is shifting into more bearish action.Here's what this is all telling me…Even though hopes are high for a trade deal with China, and the dominant narrative is that a trade deal will send stocks to the moon… In the background, traders are acting differently.Jeff has preached all week that you should be cautious of this market. I'm in firm agreement with him. Judging by how the smart money has behaved, we're just one bad day away from what could be a nasty correction.Regards,Mike MersonManaging Editor, Market MinuteP.S. Here's another interesting idea Jeff told me recently…When the market inevitably turns down, not every stock will fall. Instead, he reckons money will flow out of the high-flying tech stocks and into the beaten-down value stocks.One such stock is among the three Jeff trades in his $19-per-year option trading advisory, Jeff Clark Trader. And he may make a trade on it as soon as Monday.Click here to learn what it is… and what you have to do to get in on that trade. In Case You Missed It…The 32-Second Trading Method That Helped Jeff Clark Retire at 42 (Live Demo Below)Hi, my name is Jeff Clark.For the past 36 years, I've helped people from all walks of life retire wealthy. Retired school teachers… doctors… even the occasional pro athlete.But I haven't done it the usual way…My method is different. It's unlike anything you've probably ever seen before.We're unveiling it right now for just $19.Want to see how it works?Watch this 32-second "live demo." More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Strong Buy Stocks That Are Bargains Right Now * 7 Excellent Bank Stocks Worth an Investment * 4 Small-Cap, Big-Dividend Stocks The post Jeff Clark's Market Minute: The Most Vulnerable Chart in the Market appeared first on InvestorPlace.
High-yield bonds are sending the stock market a warning sign.Source: Shutterstock Yes, the S&P 500 made a new all-time high on Wednesday. Yes, the Fed's easy money policy is helping to boost stock prices. Yes, President Trump wants a higher stock market. And yes, we are entering a seasonally bullish period for stocks.And, if high-yield bonds were making new highs along with stocks this week, then I'd have to wipe the bearish egg off my face and concede that the stock market isn't in as much trouble as I thought.InvestorPlace - Stock Market News, Stock Advice & Trading TipsBut…As we've pointed out many times before, the action in high-yield bonds tends to precede the action in the stock market by anywhere from two days to two weeks. So, it's notable that while the S&P was posting a new all-time high on Wednesday, junk bonds were falling.And, by the look of the following chart of the iShares iBoxx High Yield Corporate Bond ETF (HYG), junk bonds look vulnerable to a much more serious decline.Take a look…This chart is forming a rising wedge pattern with negative divergence on the MACD and CCI momentum indicators. In other words, as HYG has been pushing higher and making higher highs over the past few months, the momentum indicators have been making lower highs.This pattern usually leads to a breakdown - which means a selloff in the high-yield bond market.That would be bearish for stocks.And, if we combine this setup with the recent increase in bullish investor sentiment (a contrary indicator), the complacent level of the Volatility Index (VIX), and the huge price difference in VIX call options over VIX put options…Then that gives trades plenty of reason to be cautious - or maybe even bearish - on the short-term prospects of the stock market.Best regards and good trading,Jeff ClarkP.S. There's two ways to react to a bear market.You can sell everything, sit on your hands, and wait for it to eventually blow over…Or you can start trading… and find ways to make money no matter what happens.If you ask me, I choose the latter. And, while it's true that trading has a bit of a learning curve, I recently designed a program that can help you surpass it… and deliver winning trade recommendations at the same time. Get all the details here. Reader MailbagToday a subscriber shares his satisfaction with Jeff's recommendations…Jeff, I have been with you for about five months now and am extremely satisfied with your recommendations (meaning that I have profited from them nicely) and in some weeks no recommendations (meaning I don't expect a new recommendation when market conditions are such that you cannot give us one).I have just joined the Breakout Alert and look forward to more of your good work.- HowardThank you, as always, for your thoughtful comments. We look forward to reading them every day. Keep them coming at email@example.com. In Case You Missed It…This lumberjack also happens to be a rocket scientist who created an entirely new way to invest in the tech marketJeff Brown stepped away from the bustle of Silicon Valley to live a quiet life. But that didn't stop him from becoming a top venture capitalist, or developing an entirely new way to invest in the tech market that anyone can use for the chance to see big, fast, once-in-a-lifetime gains like 494%… 617%… 793%… 884%… 2,293%… even 11,764%.It's not too late to find out his secret.The post Jeff Clark's Market Minute: This Pattern Is Another Warning Sign for Stocks appeared first on InvestorPlace.
ETF short interest can shed light for traders on areas of the market where investors see potential weakness. S3 Partners analyst Ihor Dusaniwsky released his latest list of ETFs with the most short interest ...