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Messages From the Currency and Bond Markets Continue to Warrant a More Conservative Stance


There are some minor signs of hope in the resiliency of the high yield bond markets and the potential change (which hasn't happened yet) in the franc / krona indicator.


Junk bonds are still holding their own. Hey! Score one for the bulls!

The SPDR Lehman High Yield Bond ETF (NYSEARCA:JNK) has managed to hold up above its key 60-day moving average line thus far. This is a small piece of bullish evidence on which those who are long of risk assets can hang their hopes (along with the fact that multiple equity indices remain slightly above key long-term moving averages). I would certainly not be strutting around without a care in the world if I were a risk bull, however. The JNK can break down below support very easily in the short-term as can the equity indices I just mentioned.

Click to enlarge


When you put all the evidence together in a pot and mix it up, you still get a result that merits caution on the risk markets (with the exception of the long-term bullish outlook on the Mexican equity markets as I noted earlier). As a technical analyst, I will need to see substantial improvement in the overall technical condition of the euro and the Aussie dollar for me to change my longer-term opinion on the markets. Short-term rallies can and will occur, however, and I will make every effort to call out one ahead of time if I get some signs that one is coming (a tradable rally is more than just a one-day head fake in my world). Right now, no such evidence is jumping out at me.

Twitter: @tttechnalytics

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