Joe Friday: ''Junk Bonds Look Bearish and Could Break Support''

May 24th, 2013

by Chris Kimble

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High Yield ETFs JNK & HYG have formed bearish rising wedges. Two-thirds of the time, prices end up lower in the future after forming this type of pattern. The support lines of the rising wedges are being tested very hard and appear to be giving way right now.

This pattern becomes very important with the effective yield on high yields at the lowest levels in 20 years plus (most overvalued ever), reflected in the chart below.

Joe Friday: "Effective yield has formed a bullish falling wedge at (1). This pattern suggested higher yields two-thirds of the time. If yields do move higher, the majority of the time stocks end up lower in price."

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