LQD “moving in a triangle pattern since 2012, with rising trendline support intersecting at $113.30. The ETF peaked three times between $123.20 and $124.48 over the last five years. The November high of $124.48 could be considered a false upside breakout, which indicates the price is likely to keep heading lower toward trendline support. A breach of the multi-year rising trendline, and especially above a drop below $112.60, indicates a long-term downtrend in high-grade corporate bonds is underway,” according to Investopedia.
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Some fixed-income traders are growing concerned that the steadily rising prices and lower spreads could diminish the speculative-grade debt market’s ability to generate overall positive returns even as rising interest rates cut down the value on bonds.
HYG’s “next wave in the downtrend is likely starting, as a sharp drop off the $87.56 October high has broken the rising trendline for 2016 and taken out all major swing lows since August. This indicates a downtrend has begun in the short-term, which aligns with the long-term downtrend,” according to Investopedia.
For more information on the credit market, visit our corporate bonds category.