July 27, 2020
By Mish Schneider
Junk Bonds JNK, rallied Friday closing above the 50-week moving average.
Then again today, JNK ran up to yet another new high since March.
This is the best example of “Don’t Fight the Fed!” (especially ahead of the Fed meeting).
Until I see a shift in risk appetite, I cannot get negative, in spite of the headlines, economic data, rise in gold, fall in the dollar or civil rest.
Call JNK the perfect timing mechanism, as I believe we will see the market sputter, but not until JNK stops moving up and gives us a real topping sign.
The weekly chart of JNK shows it cleared the 50-week moving average (blue).
A couple of other noteworthy features of the chart.
The high June 5th is 105.26, just cleared.
The 200-WMA (green) is well above at 107.64.
The 23-month moving average is at 105.83.
Should JNK continue its north route and clear 105.83, I imagine the 200-WMA is next.
That means the overall market will continue to run up since risk appetite will remain high.
If JNK fails 104.91, especially with the end of the month nigh, then I would consider that a top for the overall market as well.
Then, we can still talk about inflation, and even more readily, add the prefix “stag” before it.
Russell 2000 (IWM) 146 support 150 resistance
Dow (DIA) 270 now resistance 262.50 support
Nasdaq (QQQ) 262 now resistance with support at 250
KRE (Regional Banks) Yo-yo again, unconfirmed bearish phase. 37.70 the 50-DMA
SMH (Semiconductors) 165-168 resistance
IYT (Transportation) 172.75 support and back into an unconfirmed accumulation phase
IBB (Biotechnology) 142 resistance
XRT (Retail) 46.00 support
Volatility Index (VXX) I’d like to see a new multi-month low, then reversal
Junk Bonds (JNK) Cleared 104.95-must hold
LQD (iShs iBoxx High yield Bonds) Support at the 10-DMA 137.50