Investors Should Watch Junk Bonds While Waiting For Stimulus Bill

junk bonds etf jnk trading at price support 200 day moving average chart image september 22

Yesterday Mish talked about watching the Junk Bonds ETF (JNK) to see if the Fed would continue supporting high risk companies.  

Today JNK had an inside day. This comes after a large red day where JNK gapped lower breaking its 104.27-106 range. The break also happened to coincide with a major support area dating back to July 23rd. 

With the 200-day moving average closeby, we can use this as new price support, looking for more consolidation and a move back through 104.27.

Tech stocks including big names like tickers FB, NVDA, AMZN, and ZM also came back strong today showing that people habitually run back to growth stocks.

This shows that while the S&P 500 (SPY) and Nasdaq 100 (QQQ) confirmed a caution phase change last Friday, buyers haven’t thrown in the towel. 

While it looks as though the market is attempting to claw its way back up, we can’t hide the fact that this current correction has lasted longer than many expected. 

With so many unsettled political events in the air right now, it can be hard to grasp what the Fed will do next. 

We are still waiting for a resolution regarding the next stimulus relief bill. Current matters continue to stack against the odds of this swiftly being passed. 

Will the stock market keep pushing higher as it holds its breath waiting for this bill to go through, or will it grow impatient and throw a fit?

We know we have the Federal Reserve’s support, so possible pressure from the market itself could be what speeds this process up.

Trading Levels and Analysis For Key Stock Market ETFs:

S&P 500 (SPY) Filled the gap left from yesterday. Either a V bottom or a run to overhead resistance at 335.

Russell 2000 (IWM) Inside day. 145-152 Range to break 

Dow (DIA) 275 key resistance to clear

Nasdaq (QQQ) Rallied right to the 50-DMA

KRE (Regional Banks) July low is some support at 34.00 with 37.00 place to clear

SMH (Semiconductors) Needs second day close over the 50-DMA

IYT (Transportation) 201 resistance to clear with support at 195

IBB (Biotechnology) 132 held but needs to get back over 135.44

XRT (Retail) Strong performance over the 50-DMA.

Twitter: @marketminute

The author may have a position in the mentioned securities at the time of publication. 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.

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