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Outflows from mutual funds have been rather large of late, actually the biggest in the past three years at (2), reported by Sentiment Trader. At the same time this took place, Junk bonds have been hit hard, driving them down to three year support line (1) in the upper left chart.
As you can see, over the past few years, when JNK hit this support line, it rallied and so did the S&P 500. The largest outflows in the past 4 years took place in 2011 and at the same time JNK was hitting support.
In the past this combo of junk at support and investors panic to withdraw assets, found the S&P closer to a low than a high.
Will it be different this time?
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