Connect with us

Hi, what are you looking for?

Stock

Plenty of Strength in HY Bond A-D Line

High-yield bonds tend to trade more like the stock market than like treasury bonds, and what’s more is that these high yield or “junk” bonds are terribly sensitive to liquidity conditions. That sensitivity works both ways. When money is so plentiful that even the most marginal quality investments can get some, that is a sign that liquidity is going to be plentiful for a while for all types of stocks. And when liquidity starts to dry up, these high-yield bonds tend to be the first victims.

Back in 2021, I highlighted the big bearish divergence evident between the higher price highs in the S&P 500 and the lower tops in the High Yield Bond A-D Line. That was a correct omen of the liquidity troubles to come in 2022. Things started looking better coming out of the October 2022 bottom, when we saw strength in this HY Bond A-D Line, but that strength eventually gave way to another bearish divergence versus the S&P 500 in the summer of 2023.

Now we are once again seeing great strength in this A-D Line, as it is going up at a very steep angle, and matching the price gains of the S&P 500 step for step. The message is that liquidity is plentiful, and should remain so for a while. There is no sign of a divergence yet, and I would expect that we shall see a divergence with prices before any real trouble gets started. That has been the track record for these data, which FINRA publishes going back as far as 2005.

One note about these data: You can access them daily at this link. FINRA does not post the data until very late at night for the preceding trading day, because evidently it takes a while to compile all of those statistics. FINRA also rejiggered that web site, changing the format so that it is easier for those who are adept at programming to be able to scrape the data automatically. It takes a while to learn to read through the multiple lines of data, but what you want is to fetch the “CORP” data series if you wish to replicate this chart yourself. Or you can sign up at our web site for our twice monthly McClellan Market Report or our Daily Edition, where we feature it periodically.

You May Also Like

Economy

BlockSpan ICO: Accelerating NFT Innovation with Confidence The BlockSpan ICO aims to revolutionize the NFT space. To achieve that goal, it will provide an...

Investing

ZIM Integrated (NYSE: ZIM) stock price has crashed hard after the company canceled its dividend as the shipping industry recoils. The shares plunged to...

Investing

IDS share price has suffered a big reversal in the past few days as demand for the stock drops. Shares of Royal Mail’s parent...

Stock

On this week’s edition of Stock Talk with Joe Rabil, Joe features special guest, Bruce Fraser of Power Charting. Joe and Bruce discuss swing...



Disclaimer: Frequencytraders.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.


Copyright © 2024 Frequencytraders.com