Can The Stock Market Bounce If Junk Bonds Sell Off?

The small-cap Index Russell 2000 ETF (IWM) looks hopeful for a Wednesday bounce while the High Yield Corporate Debt ETF (JNK) sends another warning sign.

Though we are watching all major indices, IWM is the most interesting since it found intraday support near its 50-Day moving average at $228.06.

It should be noted that none of the other stock market major indices are as close to a major moving average as IWM. 

On the other hand, High Yield Corporate Debt (JNK) has recently broken main support at $108.06. This shows that investors’ appetite for risk has waned as JNK tends to move higher in a bullish environment. 

junk bonds russell 2000 price comparison trading analysis investing chart november 24

Therefore, if IWM is going to turn around we should also watch for JNK to do the same. Nonetheless, if IWM pushes higher while JNK continues to break down, a bounce could be short-lived.

However, with a potential bounce setting up, let’s look at the strongest members of Mish’s Economic Modern Family of ETFs for trade ideas.

Currently, the Transportation ETF (IYT) and the Regional Banking Sector ETF (KRE) are the top performers of this week.

important stock market etfs trading investor watch news chart november 24

As seen in the above charts, KRE along with IYT was able to close over the prior days’ low showing extra strength compared to IWM which closed almost flat on the day at -0.26%

With that said, for Wednesday, watch for KRE to clear resistance at $75.59 and for IYT to stay over its 10-DMA at $275.83.

These will be pivotal levels for each to clear or stay over. 

One last sector to watch is the Retail ETF (XRT).

If transportation can head higher, watch for XRT to follow as both at times can trend together. 

Watch Mish dive into the energy and oil sector on Bloomberg!

Stock Market ETFs Trading Analysis & Summary:

S&P 500 (SPY) 464.45 new support to hold. 

Russell 2000 (IWM) 228.06 support the 50-DMA.

Dow (DIA) Watching 355.34 to hold.

Nasdaq (QQQ) Was able to close over the 10-DMA at 396.70, however, has better support from todays low at 392.92

KRE (Regional Banks) 75.59 resistance.

SMH (Semiconductors) Watching to hold over the 10-DMA at 303.52

IYT (Transportation) 270.89 support. 

IBB (Biotechnology) Needs to hold over 152.41

XRT (Retail) Watching to hold over the 10-DMA at 102.32

Twitter: @marketminute

The author may have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author and do not represent the views or opinions of any other person or entity.

Sign up for our FREE newsletter
and receive our best trading ideas and research