Some notable things are happening in the Bond Market that suggest risk appetite is drying up.
First here’s a look at Long Term US Treasury ETF TLT. A wedge has formed here as it attempts to make a higher low. If it breaks higher, we could be on the way to a 200 day moving average test. On the other hand, a range breakdown below the rising 50 day moving average would be huge for treasury bears.
The ratio of High Yield Corporate Bonds relative to Investment Grade Corporate Bonds are testing long time resistance. Over the past few months, momentum in this ratio has disappeared.
It’s a similar story is risk across the U.S. bond market. High Yield ETF JNK relative to Long Term US Treasuries is showing the exact same pattern.
It’s worth noting these ratio tops aren’t stock market timing mechanisms. Even if these ratios completely roll over, they aren’t by themselves indicative of a major top.
However, these charts ARE indicative of a decline in risk appetite and liquidity. The market is simply becoming more vulnerable to a notable correction. That’s all. Don’t let fear mongers scare you with this stuff.
Trade ’em well