Are junk bonds about to send stocks an important message? It looks like it from this chart!
Junk Bond ETF (JNK) has created a series of lower highs and lower lows over the past couple of years, inside of falling channel (1). When it broke support in early 2018 at (2), stocks struggled to make much upward progress for the next few months.
The rally off support last year saw JNK hit falling resistance a few months ago and some softness has set in. The small decline of late has it testing a series of higher lows at (3).
What JNK does at (3), looks to send an important short-term message to the broad markets.
Either support is going to hold or will give way. Either way, its price action in the short-term should be very important to stocks!
