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High Yield Leads the Way

This is a syndicated repost published with the permission of Slope of Hope. To view original, click here. Opinions herein are not those of the Wall Street Examiner or Lee Adler. Reposting does not imply endorsement. The information presented is for educational or entertainment purposes and is not individual investment advice.

This is a look at two ETFs: the granddaddy of them all, SPY (the S&P 500) and the high-yield corporate fund symbol HYG. In normal markets, they pretty much mimic the behavior of the other. As you can see, for many years, they are joined at the hip.

Recently, however, a divergence has taken place which is well worth noting. The high yield corporate bonds have weakened. having peaked way back on February 8th while the SPY hit its own lifetime high a full five weeks later.

Take a closer look. The HYG (black line) has been making a series of lower highs while the SPY has steadfastly been marching higher and higher.

Historically, the HYG provides a heads-up about a shift in the direction of equities. I suspect this will be yet another instance of such a phenomenon.

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