My Junk Indicator

• Posted by Greg Harmon
• on September 20th, 2013

High Yield or Junk Bonds are often used as a barometer of risk taking in in the market place. This often becomes a tool for equity traders to measure potential appetite for equities, as a risk asset. So what does the chart of the High Yield Bond ETF, $JNK, say about risk taking? Wax on Daniel-san.

There is a lot going ion in this chart from a technical perspective and most of it is positive. Let’s start with the falling tend resistance line (in blue). The price broke above this Wednesday and has held above it. This is your first buy signal. The green Harmonic Butterfly is next with a Potential Reversal Zone (PRZ) at 42.64, a bearish pattern but with a long way to go higher before the reversal. The pink Harmonic is approaching the Bat PRZ at 40.65 but could also morph into a Crab with a PRZ higher at 41.89. The 200 day Simple Moving Average (SMA) above at 40.58 also looks to be a magnet. The Relative Strength Index (RSI) is in bullish territory, but pulling back slightly after a partial retrace Thursday in the price candle. The Moving Average Convergence Divergence indicator (MACD) is rising and supports more upside. This total picture paints a mosaic that looks for more upside price action in high yield bonds. In turn this is a positive for more upward price action in the stock market.

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