Junk Bonds Are Outperforming Stocks

Junk bonds have been in the news a ton over the past few months, mostly in a bad way, as they have been falling in price since April of 2014.

The chart above looks at the Junk Bond (HYG)/ S&P 500 (INDEXSP:.INX) ratio.

As you can see, the ratio has been heading south for years, reflecting that junk has been weaker than the broad market.

On December the 21st, the Power of the Pattern shared that iShares iBOXX $ High Yld Corp Bond (ETF) HYG was at its 50 percent Fibonacci retracement level of the rally off the financial crisis low.

At the same time it was on potential support, momentum was hitting very oversold levels and volume was spiking higher, which might be reflecting a panic in this very hard hit sector. (See Post Here)

Joe Friday Just the Facts….The HYG/SPX ratio above looks to have formed a bullish falling wedge and it is breaking out of late, reflecting the Junk bonds have been stronger than the S&P recently.

This was originally shared on Kimble Charting Solutions