Are Junk Bonds (JNK) Sending A Bullish Message To Stocks?

There are several popular indicators that investors use to gauge the health of the stock market.

One that I like to follow is the SPDR Junk Bonds ETF (NYSEARCA:JNK).  This index provides insight into the current appetite of investors (i.e. “risk-on” or “risk-off”).

For instance, stocks and the S&P 500 (NYSEARCA:SPY) typically do well when investors have an appetite for risk. So stock market bulls want to see the Junk Bonds ETF going higher.

The chart below is a 3 year look back at the Junk Bonds ETF (JNK).  As you can see, JNK hit a low in February 2016 and has been moving higher since.

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But the price action of JNK in 2017 has taken the shape of a bullish ascending triangle (flat top and rising bottoms).  This comes just as the ETF is also testing its downtrend line from the early 2015 highs.  Is a dual breakout in the works?

ALSO READ:  Is The US Dollar Breaking Down?

Historically this type of price action is NOT a concerning message for the stock market. More concerning would be a break back below both lower blue support lines.


Thanks for reading and have a great week!


Twitter:  @KimbleCharting

Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.