High Yield Bonds Mark Market Top?

October 2nd, 2011
in contributors

questionby Chris Kimble of Kimble Charting Solutions

Cross post from advisorperspectives.com/dshort

The price action of high yield funds can be great tools for helping investors and financial professionals in building portfolios, a topic I previously discussed on September 20th. The first chart below illustrates that, over the past decade plus, high yield funds have given quality leading-edge signals of when to overweight stocks and when to underweight them.

Follow up:

kimble-110920-high-yield-indicator
Click here for larger image

The high yield funds gave a "Sell Signal" a few months ago, suggesting two things: (1) sell the high yield funds (2) lower equity exposure. The question now is whether high yields are sending a new buy signal. Actually the high yields are sending a message that risk to the economy and the stock market remains above normal, as the high yield funds are now breaking below their early August lows.

kimble-110929-high-yield-indicator
Click here for larger image

If history is any guide, this breakdown in the high yield funds is sending a message of concern for the economy and equities.

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About the Author

For the most up-to-date Kimble analysis, check out Chris's blog: Kimble Charting Solutions

 
















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