the chart that could be flashing a sell signal for stocks

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the chart that could be flashing a sell signal for stocks

"the chart that could be flashing a sell signal for stocks" 

in the news the chart that could be flashing a sell signal for stocks? What this all about..... See below. 

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There is a curious divergence in the market right now recently the HYG has taken a bit of a leg lower. but how worried should investors out there be? this is an interesting trend here, that we are seeing. Here is the chart, 

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What does this mean?

well it means that up until the end of February investors were taking out more and more risk. Piling into the high yield bonds, and then suddenly they have realized, the fed might actually be going to raise rates soon, on march 15th, as well as increased concerned about the FREXIT, with the french presidential election. 

 Those two issues are the main 2 factors right now. What this means is that investors are starting to take some money off the table from some of the most riskier assets like the high yields and maybe now be ready to start looking to other areas in the up coming weeks.

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Investors may lose 40% in ‘safe’ bonds — and retirees are most vulnerable

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Investors may lose 40% in ‘safe’ bonds — and retirees are most vulnerable

Investors may lose 40% in ‘safe’ bonds — and retirees are most vulnerable

"Investors may lose 40% in ‘safe’ bonds — and retirees are most vulnerable" 

Investors may lose 40% in ‘safe’ bonds — and retirees are most vulnerable? Is this really true..... See below. 

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 The post-election rally so far has been a boon for stocks and a bust for bonds.

The yield on the 10-year Treasury TMUBMUSD10Y, +3.56%  closed at about 2.20% on Wednesday, up sharply from its all-time closing low of 1.36% in July. Since bond prices fall when yields rise, anyone owning longer-term bonds has taken a big hit. In just two days after the election, for example, global bond markets lost a collective $1 trillion.

If more of the same is ahead over the next few years, many investors will be in a world of pain, especially retirees, who could suffer 2008-style losses — this time in “safe” bonds.


President-elect Donald Trump's son-in-law Jared Kushner is poised to play a powerful position in Trump's presidency — with or without an official White House post. WSJ's Shelby Holliday reports.

“The typical investor today has never experienced a sustained rising-rate environment and they are emotionally and historically unprepared for what happens when interest rates go up 3% or 5%,” he said in a telephone interview this week.

Millions of Americans, he observed, “are engaging in a variety of risky behaviors, often without knowing what they’re doing. They’re setting themselves up to lose a lot of money over the next several years, perhaps as much as they lost in 2008 in stocks.”

“You could see 20%, 30%, 40% losses in the bond market over the next several years,” he continued, “and the people who are most exposed to it are retirees trying to live on their income. The people who are the least able to handle it financially are the ones most likely to suffer.”

Much of this is because of the financial crisis and the Great Recession, when the Federal Reserve dropped interest rates near zero and it and other central banks unleashed torrents of money to get the economy moving. The result was only a half-decent recovery.  Job growth has been OK, but wages have just begun showing signs of life. With a shaky global economy, Fed Chairwoman Janet Yellen has been reluctant to hike short-term rates.

As a result, retirees have earned zilch from really safe CDs and money market funds, so they’ve turned to the bond market, where we’ve probably seen the biggest scramble for return and yield in recorded history.

Problem is, while people think they’re being prudent by avoiding stocks, they are actually taking on more risk piling into bonds.

“People who are desperate for income are buying riskier and riskier bonds,” Edelman explained. “They’re buying long-term bonds, because 30-year bonds pay higher interest rates than three-year bonds, and they’re buying bonds of issuers that have shaky financials.”

“What these folks don’t realize is that as interest rates go up, the value of bonds goes down and as company performance weakens, their ratings go down and as ratings go down, the value of the bond goes down. Very often, it’s a double whammy.”

In general, the longer a bond’s maturity, the greater is its sensitivity to interest rates.  So, when rates fall, a 30-year Treasury bond will gain more in price than, say, a 10-year note.

The opposite happens when rates rise. So, investors who “went long” in search of higher yields would be hit hard if rates suddenly rise. The capital losses they’d suffer from a bond’s plunging value could easily outweigh the higher yields they’ll get.

Even worse, people have plunged into high-yield bonds, emerging-market debt, and other risky fixed-income products that carry credit risk along with interest-rate risk. With $1.6 trillion in U.S. high yield bonds and $25 trillion in emerging-market corporate debt, rising default rates could wreak havoc.

Once rates really start rising, “we will see more investment losses than we have ever seen, partly because many Americans own these bonds either directly or indirectly — either through their pension funds or their retirement accounts at work—and more people own bonds than own stocks…It is clearly something that is going to affect every household that owns assets in this country.”

The good news is you can do something. Selling longer-dated bonds when the market bounces back and replacing them with intermediate-term bonds (in every category you own.  Also, sell high-yield and emerging-market bonds the day before yesterday.

Maybe its wise not to load up on stocks, but don’t be afraid of them, either.  A broadly diversified portfolio is your best defense if the market hits the fan, which may happen sooner than we think.


We have our overall outlook for pending 2017 period in the coming newsletter

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Bonds Daily Chart - What the bonds daily Chart is saying

Bonds Daily Chart - What the bonds daily Chart is saying

Having a look at the bonds daily chart, since the Ben Bernanke and the fed have chosen to keep purchasing bonds, and that news has come out, you can see the bonds look perky right now.

Not only that but bonds seem to be coiling right now, and it seems that a bullish flag might be setting up. If this does break out to the upside that would be bullish for bonds, and bearish for stocks and equities.

bullish flag pattern

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The bonds chart

The bonds chart

Taking a quick look at bonds, we can see that over the last few weeks, the bonds have produced an ASCENDING TRIANGLE.

These are seen as bullish patterns and more often then not precede higher prices, especially if we break that top resistance point at 133.40 mark.

If we do break this top resistance, that will probably not bode well for the market.  Time will tell.

bonds chart

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Bonds Chart - Bonds Chart

Bonds Chart

If we have a look at the daily bonds chart below you can see that we are in a downwards channel. This is what is giving equities and the indicies lots of life and vitality at the moment as money is coming out of bonds and into stocks and equities at the moment. 

daily bonds chart

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