HYG
2014-15 period as a guide to current environment2014-15 vs today
Seeing the first impact from virus and oil shocks now
If it plays like 2014 we can see a bounce in risk assets soon BUT the worst will come later in a few months
THE WEEK AHEAD (IRA): HYG LADDERED SHORT PUTSWith my low-yielding TLT position reaching all-time highs (and its yield reaching lows), looking to get out of my TLT stock at some point in the next few months and get into higher yielding junk, preferably at a discount over where it's currently trading.
Pictured here is an acquisitional strategy where you look to sell equally delta'd strikes laddered out in time. If price doesn't reach the strikes, you keep the premium (currently a total of 3.80 at the mid price); you otherwise take assignment and proceed to cover to reduce cost basis ... .
HYG - Strong SellHYG remains a strong sell.
Analysis Method: Fibonacci & Wave Theory
Monthly Chart:
High Wave Count:
Daily:
33 EMA Cross 50 EMA
Target: $67-$54
Will update.
FMW
A look at corporate debtThis chart illustrates the increasing importance of cheap money, which is being driven by buybacks. Once interest rates get to a certain point (via Eurodollar futures ) the S&P 500 falls apart. The point at which it falls apart seems to be dependent on a certain downward-sloping level. Historically, interest rates prairie dog above the meme line for a bit but once they go back into their hidey holes the top of the S&P is close. With my luck the Brent Johnson's dollar milkshake theory will probably be right and the complete opposite will happen.
Okay that's great. At least we know yields will eventually make their way down to 0% so... all in bonds then, right? Not exactly. Take a closer look at the available bond funds, specifically the allocation to corporate credit and the ratings of that corporate credit. There is a solid chance that you will see a lot of BBB. BBB is the last level of "investment grade" debt before it becomes "junk". Once it gets downgraded to junk the pension funds and insurance companies that own most of it are required to liquidate it. The BBB bucket alone accounts for roughly 54% ($3T) of all corporate debt and dwarfs the size of the junk bond market and if the downgrades start happening the junk spreads will get blown out.
My prediction: the floodgates will open when a seemingly healthy company defaults due to drop in revenue (and subsequently free cash flow due to being overleveraged) and the ratings agencies are forced to start downgrading companies that should have been downgraded a long time ago.
Fear of being downgraded will finally sink in and companies will be forced to look at their margins and free up cash. The first order of business is reduce largest portion of SG&A: payroll. A gigantic portion of the population is nearing retirement and they will be the first to be shown the door It sucks but that's just how it works. On top of that, all of these people that just got retired are trying to hit some magic number and are either 100% S&P or 100% "X Retirement 2025" fund, which consists of a lot of equities and a ton of BBB garbage that doesn't know its garbage. So no income, no available jobs, halved 401k. Fantastic. Time to downsize but unfortunately there is nothing to downsize to because everyone else is doing the same thing. Only option is to build, rent, move in with children, or buy a double wide. So I like small houses and ELS , which is a trailer park REIT.
Bullish:
High-quality bonds: TLT , BND
REITs: ELS
Bearish:
Trash bonds: JNK , HYG
Insurance companies: the infamous AIG , AFL
$HYG Testing Resistance$HYG High-Yield Corporate Debt pushing up against resistance from decade+ symmetrical triangle. A breakout here would send a strong signal about risk appetite in the markets.
A Major change in the HYG INDEX IS HERE IT IS UP !! For the last 18 months the HYG index corp debt market has been in a sideways pattern to which I wrote in great detail the over head fib relationship to which stopped the market in its tracks . But EVERY TIME IT MADE A LOW INTO THE 200 DAY AVG IT TURNED UP AS WELL AS ALL STOCK INDEX . THE CHART IS MY VIEW OF THE LABEL BASED ON MY FIB CYCLES AND MY WAVE STRUCTURE .I WILL STATE MY VIEW IS THAT THE HYG IS ON THE VERGE OF A BREAKOUT TO TARGET 90.4 TO 91.6 OVER THE NEXT 30 TD
OPENING ("THE KID"): HYG DEC 20TH 87 SHORT PUT... for a .95 ($95) credit.
Notes: She's gone quite aggressive here, selling the first out-of-the-money strike with a break even at 86.05. She'll look to roll for duration on extrinsic approaching zero to the first out-of-the-money short put for a credit or, at the very least, toward current price for a credit, looking to emulate HYG's annualized dividend (currently 4.56) without actually being in the stock. She said she's fine with taking assignment at 86.05, but would prefer reducing cost basis "as much as possible" before taking on shares.
She liked my "not a penny more" idea (See Post Below), called it "nice" but "not aggressive enough." Kids nowadays ... . We'll see how her "aggressive" goes.
THE DAM IS STARTING TO CRACK The HYG has been one key reason the markets are where they are based on the buyback with cheap to free money. the news of the PUBLIC BEING ABLE TO NOW TRADE FOR FREE COMMISSION IS A SIGN THE STRONG HANDS ARE DUMPING STOCKS HELD FOR THE LAST YEAR AND MAYBE GOING BACK TO 2009 FROM STRONG HANDS TO WEAK HANDS AND TO BUY UP ON THE CHEAP IS A SAYING I LEARNED IN 1982 FROM ONE OF THE RICHEST MAN I know the same thing happened in spring 1929 from April to Sept SEE ALL ARTICLES AS TO MARGIN 1929 CHANGES
S&P Next Week Expected Move ($33.0) & Gravity PointsMy 2nd Long Term Target was hit and surpassed.
Sentiment is complacent. Complacency is different from Greed. Still bearish, but more sneaky. I'm a strong believer in sentiment and I believe we're going to need to work off this extreme reading one way or the other. Historically, we move sideways to lower after reaching such optimistic levels. It's not sustainable. We're talking 90-95th percentile levels, which is the only time it's worth mentioning.
I don't anticipate a crash or anything, but do think expectations over the next 1-3 weeks should be tempered.
Last Week:
**Unemployment:
High Yield: (Non-confirmation)
Stock Pick: (Deep Value)
Homebuilders: (Interest Rates)
Real Estate: (Interest Rates)
G7 Friend: (International)
Regional Banks: (Retest?)
Dollar: (Strength via lack of bearishness?)
Growth vs. Value Ratio: (Reversal?)
Healthcare vs. SPY Ratio: (Breakout?)
Consumer Discretionary vs. Consumer Staples Ratio: (Failure?)
Emerging Markets vs. SPY Ratio: (Failure?)
Low Volatility vs. High Beta: (Risk on)
HYG non-confirmation - Debt Market Leads Equity MarketHistorically has been a pretty reliable leading indicator.
Short Term Sentiment measures are at extremes, expecting a mild-moderate pullback to manifest in the next 2-10 days.
HYG might be time to shortHYG is hitting downward trend line resistance in a wedge pattern. It might be a good time to short. If the economy starts to break out inflation expectations should rise and all rates including high yield should rise. If the economy begins to tank, High yield bonds will be suspect and yields for junk bonds should rise as the likelihood of bankruptcy increases. If yields rise price goes down. Essentially shorting HYG is a long straddle
Short the $HYG Rejected Top of Previous Support Now (Resistance)Rejected past support now serving as new resistance level two days ago. See below. Do not trade based on my opinion. I am short HYG with puts.
High Yield Bonds (Junk Bonds) Hitting Monthly Trendline
High yield bonds (junk bonds) hit monthly resistance line.
Fundamentally, the US corporate debt has almost doubled since 2008.
Right now over 50% of them in the market are BBB, which is just a cut above junk.
Further analysis: youtu.be/V7zEXiqiiqA
Trade of the decade - short the bubble $HYG $IGEvening traders,
This is a difficult one, but one that will be immensely profitable for anyone that gets the timing right.
This thing is going to blowup. Could be tomorrow, could be a couple years. This one will be a historic trade, might not even be a bad idea to scoop some 2021 OTM puts on the low.
It's hard to bet against a sitting president, so timing will ultimately be the trade, because there is nowhere for this to go but down.
Let me know your opinions in the comment section below, and as always smash that like and follow button!
Short HYG for a Cheap Short in this Environment AMEX:HYG
If HYG breaks $85 I'm continuing short. Disclaimer: Trade at your own risk.
HYG stock price forecast timing analysis. 13-JunStock investing strategies by pretiming
Investing position about Supply-Demand(S&D) strength: Rising section of high profit & low risk
Supply-Demand(S&D) strength linkage Trend Analysis: In the midst of an adjustment trend of downward direction box pattern stock price flow marked by limited rises and downward fluctuations.
Today's Supply-Demand(S&D) strength Flow: Supply-Demand strength has changed to a strengthening buying flow when stock market opening.
Possibility of change in forecast timing: Forecast timing has become high variability conditions. because the flow of supply - demand has changed, and the supply - demand linkage is unstable.
D+1 Candlestick Color forecast: GREEN Candlestick
%D+1 Range forecast: 0.1% (HIGH) ~ 0.0% (LOW), 0.1% (CLOSE)
%AVG in case of rising: 0.3% (HIGH) ~ -0.1%(LOW), 0.3% (CLOSE)
%AVG in case of falling: 0.1% (HIGH) ~ -0.2%(LOW), -0.1%(CLOSE)
Stock Price Forecast Timing Criteria: Stock price forecast timing is analyzed based on pretiming algorithm of Supply-Demand(S&D) strength.
Read more a detailed Forecast Analysis Reports that candlestick shape and %change, S&D strength flow in the future 7 days.
www.pretiming.com
VIX, junk credit and the National Activity IndexThis long term weekly chart compares the relationship between:
1) economic fundamentals
2) fears of falling equity prices
3) expected default rates in credit markets
The top half of the chart overlays the long term correlation between the VIX (in orange) to speculative corporate bond yields (blue). The bottom half of this chart shows the Fed's National Activity Index in white.
The Fed's National Activity Index is a weighted average of 85 indicators of growth in national economic activity: 1) production and income; 2) employment, unemployment, and hours; 3) personal consumption and housing; and 4) sales, orders, and inventories. It appears the most recent quote on this monthly index lags by as much as 60 days.
The BAML junk B grade bond index currently yields spread of 4.3% over the 10 year treasury yield. The spread is the 'risk premium' investors earn over the risk free treasury rate, and is thought to imply current expectations of the default rate for credit.
The chart history shows how as the economic conditions deteriorate the fears of default can quickly spike.
The VIX index value is calculated from current price of the S&P500 index options. The VIX quote gives a measure of the market's expected annualized change in the S&P 500 index for the next 30 days.
Chart of the Day: $HYG under pressure$85.50 is the key neckline support for $HYG as it bounces off the top boundary of wedge pattern. The neckline can be seen with multiple previous SSR levels. The downward bias is reinforced by the current SSR level for which price action is firmly pinned under.
With an earnings recession in progress and oil demand in question, it is inevitable to see some stress emerging in the junk bond segment which has a fairly high representation of US shale players.
BKLN vs. HYG | Leveraged Loans Underperforming High YieldEarlier this year I pointed out how leveraged loans are increasingly in a precarious position as underlying economic fundamentals deteriorate around the world. Another way of measuring the risk premium is to observe the performance spread between the leverage loan bonds (orange line) and high yield bonds (candles). Both are in logarithmic scale.
High yield corp. bondsbig wedge forming over last two decades. no where near ATH's, unless MMT works. $SPY
