I like using a mutlitple layer/multiple moving avearage approach with the high yield funds. Why more than one moving average? First off, No single moving average is the holy grail….Short-term moving averages are great, yet often times they can pull you out too quickly and you miss out on some gains, creating false buy and sell signals, compared to longer-term averages. On the flip side they can get you in early and get you out early.
Each of the high yields in the 6-pack below have broken below their 50-EMA, causing me to reduce exposure in this complex. Wanted to update the current situation due to 2 of the 6 funds have broken their 100-EMA lines, see below.
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The high yield funds crossed above the 100-EMA almost one year ago, around 60 days ahead of the lows in the broad stock market, which took place on 9/1.
A futher breakdown (should it happen) would cause a further reduction in high yield holdings. Breaking below a 50-EMA is not that concerning of a message.
The last time the high yields crossed from above to below their 200-ema was back in 2008. Should they break the 200-EMA, a very concerning message would be at hand!