Junk Bonds Trading ‘Like Junk’ As Volatility Rises

stock market indices etfs correction price support investing analysis september 23

Let’s start with the 4 major stock market index ETFs, the S&P 500 (SPY), Nasdaq 100 (QQQ), Dow Jones Industrials (DIA), and Russell 2000 (IWM).

All 4 stock indices sold off today while breaking yesterday’s lows.

Besides the Russell 2000 (IWM), they have not traded below their recent low from September 21st.

If the stock indices continue lower, we should keep an eye on those pivotal points as they could turn into support areas if the market is able to hold this area.

We should also be watching the Volatility ETF (VXX). This can be used to determine short-term fear in the stock market. The VXX volatility etf jumped up today coming close to the high of 26.65 from September 21st.

You can see how different tickers and indices are lining up relative to their price points from the 21st.

vxx volatility etf rising concern stock market investing chart

The third thing to note is that yesterday the Junk Bond ETF (JNK) was having an inside day, while today it broke below its prior 2-day lows and the 200 Day moving average.

This is important because we have been using this to judge the Federal Reserves’s involvement of supporting high risk companies.

We also talked about how the stock market could put pressure on the government to pass the next stimulus bill quickly. Note that once again Powell stated that there is only so much the Fed can do to support the market (I mean economy!)

If we see a continuation of this price action, then keep a close eye on the Dems and Republicans to address the market’s unstable action.

One thing that is interesting to watch right now is the commodities sector. Although gold and miners took a big hit, they may have found a floor. Gold futures at $1850 is key.

Food commodities also held up relatively well. This and once the dollar stops rising, continues to support the food driven stagflation theory that now even economist are embracing. It is inevitable given the volatility in the US and globally.

With the market still highly dependent on the Fed, sometimes the best thing to do is wait through days like these. One money injection can turn everything around and give us a much safer short opportunity while we dally in commodities.

S&P 500 (SPY) Its’ all about 322 and if that breaks see 310 next

Russell 2000 (IWM) First to break the 200-DMA-145.10 the 200-DMA

Dow (DIA) 263 support but first we have the 9/21 lows 

Nasdaq (QQQ) 260 key and then 233 the 200-DMA

KRE (Regional Banks) 34.00 broke so if cannot take that back, see 32 next

SMH (Semiconductors) Seeing 161 next stop under 164

IYT (Transportation) 195 support

IBB (Biotechnology) 132 key support or its going down to 126

XRT (Retail) Granny caved to the pressure. 50 pivotal 

Volatility Index (VXX) 27.05 the 50-DMA

Junk Bonds (JNK) Broke the 200-DMA-large selling there gave us a head’s up. 

LQD (iShs iBoxx High yield Bonds) Broke the 200-D<A at 103.50

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.

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