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Two Ways: Junk Bonds Are Healthy Sign for Market


Strengthen your portfolio in good times and bad.

Junk Bonds are a Healthy Sign of the Market

The credit markets are getting "ridiculous," so says two analysts at Citigroup. In a story by Bloomberg, high-yield bonds from the least credit-worthy issuers are getting snapped up by investors.

Yields on junk bonds have narrowed by 80 basis points relative to benchmark rates in the past two weeks, the analysts wrote. Last week alone, MGM Mirage (MGM), Blockbuster (BBI), and 11 other companies sold more than $6.5 billion in bonds.

So far this year, $98.6 billion of junk bonds have come to market -- an increase of 62% over the same period in 2008.

From the Bull Pen: The risk appetite in the credit markets is a healthy sign for equities suggesting that we could see higher prices in stocks. Look to Freeport McMoRan (FCX) on its first pullback to its 20-day moving average ($67). Bulls can set a sell stop below that level.

From the Bear Cave: In an inflationary environment, all paper is good. Even bottom-rung retailers could still see their stock prices appreciate. But bears can consider a downside play in something like Radioshack (RSH). A failure near $20 could confirm a double top sell signal. Entry if and when it reaches that level.

A Quick Check Around the World

Asian trading closed with the Nikkei (Closed), India 0.87%, Hang Seng 1.06%, Shanghai -2.34%, and Taiwan -0.45%.

Across the pond, we see the FTSE 0.86%, CAC 0.90%, DAX 1.30%

As of 8 a.m. EST, S&P Futures are trading +7.25 to 1067.50 and Nasdaq futures are +12.00 to 1739.50.

A Look at Commodities

Over in commodities, crude oil is +1.09 to 70.80 while gold is +13.2 to 1018.00 this morning. Silver is +0.39 to 17.28 and copper +2.750 to 282.00.

The dollar index is -0.6250 to 76.3750.

On the Radar


10:00 FHFA US Housing Price Index 0.5% cons.

Click here for the full trading radar.

Turnaround Tuesday is back again. Good luck, Minyans.
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No positions in stocks mentioned.

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