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Currencies and Bonds Indicate a Bounce May Be Near


While we may still be in a "sell the rips" mode on an intermediate-term basis, the short-term may bring us a tradable rally in risk assets once certain support levels are reached.


Emerging markets debt still just below resistance.

The iShares Morgan Stanley Emerging Markets Bond ETF (NYSEARCA:EMB) was highlighted here in the last couple of weeks for having broken down below its support level (the 14-day moving average line) – which was to be read as being bearish for risk assets.

Today, EMB is still just slightly below the 14-day line, but it is working hard to re-capture it. Until it does, however, we have to continue to assign this tell a bearish label.

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High-yield debt nearing critical support as well.

The SPDR Lehman High Yield Bond ETF (NYSEARCA:JNK) broke below its own moving average support (the 60-day moving average) over the last week – yet another bearish tell from the bond markets. The last hope for the bulls on this chart is for JNK to hold up above the 100% Fibonacci price projection line ("correction support") at $39.80. If it does manage to hold that level, then JNK can easily regain its bullish footing and start sending us more positive messages for the rest of the risk assets. If not, look out below!

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I am starting to see some potential for risk assets to bottom out soon (today's bottom and rally is not the one of which I speak) and give traders a modest rally. That rally, unfortunately, will be one that is to be sold into in advance of yet another drop (not as bad as the recent sell-offs, however).

Twitter: @tttechnalytics

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