In recent years, junk bond ETFs have been fairly reliable indicators of credit fears that eventually spilled over into equities.
“The S&P 500 crept to another new all-time high on Friday. Negative divergences amongst important indicators remain, so it is difficult to trust the breakout,” says Investors Intelligence analyst Tarquin Coe.
“Being August, trading volume is of course very light and that adds further skepticism,” he wrote in a newsletter Monday. “However, if the index has not pulled back to the 1587 level by mid-week, then we would have to give the rally the benefit of the doubt.”
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Full disclosure: Tom Lydon’s clients own HYG and JNK.