High yield debt has taken a hard break to the downside and that supports the prediction that a pullback in markets is coming. Usually when a strong break either up or down occurs on the chart of HYG, the stock market follows within a 3 – 5 days. Using the high yield debt bond market as a leading indicator for short term swing trading is something you should be doing if you aren’t already.
High Yield Debt Chart
The hard break down in HYG is indicative of a market pullback. The move lower seems a bit ahead of the September 25 – September 29th market pullback that I predict is coming. We could see HYG chop out a little before continuing the plunge lower as drawn on the chart above.
The goal is to get out of the way of a market pullback, and then go long once the stock market reverses. Since September is the worst month of the year for stocks, you have to be careful to not chase anything higher. Ideally you want to look for oversold stocks to go long as the market pulls back. I did a stock trading lesson on oversold patterns here.