Wednesday August 7, 2024
Junks bonds are another warning sign for the markets. In bull markets they do well paying generous dividends. In bear markets their values p;lummet. No wonder 80% of CCC bonds fail altogether, default.
Here is a chart of the JUNK ETF versus IEF ETF the 7-10 year bond ETF. It shows at the level of one, parity between the two, the Junk ETF is stable with the far more reliable 7-10 year Treasury. Falling below one indicates that the value of JUNK is falling relative to the denominator of IEF. And that means investors are leaving JUNK.
The fall startred July 29 just before the stock market sell off. On the rebound yesterday and half way thru today the ratio has rallied. It won't last and Junk will truly earn its name before al this is over
NDX 2 hour
NDX rallied Monday and half way thru today's session before reversing The result was to fill the gap left by the big sell-off Friday. SPX and DJIA d did so as well.
That suggests more selling ahead. As we quoted the late Richard Russell, after a 960% down day like Friday, markets rally for a day or two, and that is just what happened.
Here is the graph of JUNK, same thing.Again gap filled.
Gold and silver frustrate but should eventually bottom and rally.
Crude oil rallied over two dollars repeating the recent pattern of a high in the low 80s and a low around 72.
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