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:

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.

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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