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Junk Bond ETF (HYG) has created a bearish rising wedge over the past few years. Weakness of late has HYG breaking support at (1) in the chart above.
Effective yields on the high yields are hitting the lowest levels in 15 years, even below the lows reached in 2007.
In the past a breakdown in price and a rally in yields on high yields has suggested challenging times are ahead for the stock market/SPY. Will it be different this time?
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First off thank you for the free and amazing analysis you provide…
Now my indicators are showing that the reason for the recent USD/equity correlation is that 2011 should have been the end of the corrective rally as is evident from the HUGE divergences in all the commodities, metals and miners since May 2011.
Some studies on that have been helpful to me.
I suggest that equities and USD will delink rather soon as deflation asserts itself over the broad spectrum and the massive debt overhang tied to the USD makes it worth more than the assets and contracts it denominates.