December 8, 2015 / 1:52 PM / 3 years ago

BUZZ-S&P 500 - High-Yield ETF divergence intensifies

** Divergence between S&P 500 Index and high-yield bond sector worsening again, and remains another warning sign for equity bulls

** Energy sector carnage exacerbating high-yield sell-off as credit stress mounts and spreads widen out with NYMEX Crude Futures near a 7-year low

** Using SPDR Barclays HY Bond ETF as proxy for sector history shows divergences have led S&P 500 dips, and more severe sell-offs, for a number of years. Chart:

** 7-month divergence in 2010/2011 preceded 22 pct SPX plunge, and summer 2014 divergence led to 9.5 pct SPX slide into Oct 2014 trough

** Protracted divergence from mid-2014 to summer 2015 ultimately preceded SPX 12.5 pct collapse into Aug low

** JNK mid-Oct high failed shy of mid-Sept high as 17-month period of declining peaks and troughs remains intact

** ETF has now violated its Oct trough, falling closer toward its Oct 2011 low

** Any further SPX divergence — especially new highs — would once again make need for catch up all the more pronounced

** Blunt in terms of timing, but unless action in high-yield improves dramatically, SPX should remain vulnerable to another sharp decline

** SPX below 2042.35, will damage its developing triangle, and below 2019.39/2017.22 can see the pattern disintegrate suggesting bullish potential is exhausted (Messaging:

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below