When stocks are in a bull market, we tend to see assets like growth stocks and junk bonds perform well as investors are in “risk-on” mode.
And often times, these are the assets to start under-performing when the stock market goes through a sell-off or correction.
Today, we pit one of these assets (junk bonds via the ETF $JNK) against its counterpart government bonds via the ETF $TLT. And we do this using a “weekly” price ratio chart.
As you can see, the ratio sent a very bearish message to TLT back in 2020 as JNK began out-performing TLT. And this has also coincided with a big equity bull market.
Today, we pit one of these assets (junk bonds via the ETF $JNK) against its counterpart government bonds via the ETF $TLT. And we do this using a “weekly” price ratio chart.
As you can see, the ratio sent a very bearish message to TLT back in 2020 as JNK began out-performing TLT. And this has also coincided with a big equity bull market.
Fast forward to today, and we can see that the ratio formed a double top at (1) and is breaking down through up-trend support.
So I humbly ask, is the ratio now sending a bullish message to TLT? While simultaneously sending a potentially bearish message to equities? If support gives way at the neckline of the double top at (2), I suspect that it is. Stay tuned!