Weak Performing Junk Bonds ... About to Get weaker?
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The inset chart below shows that it's been a tough year for junk Bond ETF JNK, as its NAV return is in the red at this time, while the S & P 500 is up nearly 20% on a YTD basis.
At this time JNK could well be creating a bearish descending triangle as it is testing support of this pattern right now. If this support breaks, odds increase JNK declines to test support of its multi-year rising channel.
Two years ago, summer of 2011, Junk bonds reflected weakness against the S&P500 and in the end, SPY fell over 15% from August to October. Is JNK sending a message to respect? Is this nothing more than bond prices declines in a rising interest rate environment? Will it be different this time?
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