HYG Update

Many of you have been around as long as we have been using High Yield Credit as a leading indicator and know how effective it has been as an early warning of either upside moves or downside moves before they start.

I was going to just update the most recent information that applies to the immediate future, but I thought it would be good to remind us who may have forgotten and show those who never knew just how bad HY Credit is in relation to the market, just how effective its signals on all timeframes have been and what all of them show now which is a full house.

Let me start from the most important, long term trend and work down, but remember that HY Credit is a risk asset that normally "should" rally with other risk assets like stocks, but when it comes to deciding which of the two are right when they diverge, I'd remind you of the Wall St. maxim, "Credit leads, stocks follow"so pay attention not only to the 3C trends in HYG, but the HYG price trends vs the market.

 Long term HYG 2 hour 3C chart, note the price trend as well as the 3C divergences.

If this seems "unrealistic" or hard to believe, let me just post a few charts that are beyond interpretation, they are real world numbers, hard math, no interpretation.

 SPX=green / HYG= red Daily chart.

 SPX=red / Percentage of NYSE Stocks Trading ABOVE Their 200-day Moving Average = green.

Like volume, usually internals such as this will rise with higher prices, in this case though they topped at 80+% (around 84% of NYSE stocks were > their 200-day) and now they are below 50%.

The NASDAQ Composite A/D Line=Green / NASDAQ Composite (over 3000 assets)= red, the A/D line "was" leading the Composite until something changed.

You'll notice all of these changes from HYG to internals all took place around the same time and are all just about equally as bad.

 HYG 60 min

HYG 30 min

HYG 15 min

HYG 10 min

HYG 5 min

HYG 3 min

HYG 1 min intraday.

It's hard to imagine this market not falling through the floor.