Bullish Trends Are Still Holding Up in Risk Assets for Now, but How About October?
It's time for risk assets to start building their strength into the end of the month/quarter, right? This week has been very ho-hum, but expect some better action in the next nine calendar days. After that, however, be careful!
The daily chart of the TNX still says "up, then down."
The daily chart shows how TNX has crept lower this week as stocks have come in a bit. The fulfillment of the c wave projection of the abc correction would take TNX up to the 1.955% level – and even a bit beyond that. A close above 1.978% will tell me that 2.241% (and possibly 2.473%) will be tested eventually during wave iv. Wave v, when it occurs, should mean at least a test of the July lows in yield at 1.394%. It would be hard to imagine rates falling back down to those levels while risk assets were rallying. This is why I'm of the opinion that risk assets rally a bit further, then start to correct lower (while yields rally a bit further, then move back down to the lows).
Click to enlarge
Junk bonds have corrected a little & may drop some more – but uptrend still intact so far.
The high yield bond market has been a go-to play for many investors looking for a risk alternative other than equities. The attraction is the obvious correlation to stocks but with the added bonus of a 6% or so yield. The chart below of the SPDR Lehman High Yield Bond ETF (NYSEARCA:JNK) shows the nice run that took place from the beginning of June until just a few days ago. It also shows a matching uptrend in the RSI for JNK. It's been pretty steady upside action for both price and the RSI with just a few days at a time of corrective action. That's where we may be right now – in another JNK mini-correction. To me, as long as the uptrend line remains intact for JNK, the bull phase for risk assets should be considered intact.
Click to enlarge
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.