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The charts, graphs and comments in my Trading Blog represent my technical analysis and observations of a variety of world markets...
* Major World Market Indices * Futures Markets * U.S. Sectors and ETFs * Commodities * U.S. Bonds * Forex

N.B.
* The content in my articles is time-sensitive. Each one shows the date and time (New York ET) that I publish them. By the time you read them, market conditions may be quite different than that which is described in my posts, and upon which my analyses are based at that time.
* My posts are also re-published by several other websites and I have no control as to when their editors do so, or for the accuracy in their editing and reproduction of my content.
* From time to time, I will add updated market information and charts to some of my articles, so it's worth checking back here occasionally for the latest analyses.

DISCLAIMER: All the information contained within my posts are my opinions only and none of it may be construed as financial or trading advice...

Dots

...If the dots don't connect, gather more dots until they do...or, just follow the $$$...

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Sunday, November 19, 2017

Small Caps & High Yield Corporate Bonds Hint of Higher Volatility Ahead

As can be seen on the Daily comparison chart and percentage-gained graph below, the Russell 2000 Index (RUT) and the High Yield Corporate Bonds ETF (HYG) generally trade lock-step, although the RUT is accompanied by more volatility and larger swings.

At the moment, the RSI and MACD indicators are hinting of lower prices ahead for HYG and volumes have spiked over the past few days.

We'll see if volatility ramps up and whether any significant weakness hits both of these in the near term...particularly as U.S. Republicans battle to reform and cut taxes before the end of the year.

In this regard, watch for a drop and hold below major price support (and the 200-day MA) on HYG at 86.00 as a potential harbinger of similar fate for Small Cap stocks.



I'd also watch to see whether price on the RUT:RVX ratio falls below the 85.00-105.00 zone (as it bounces in between), as shown on the Daily ratio chart below. Major price support (and the 200-day MA) lie around 85.00 and much higher volatility, and weakness, wait below that level for the RUT.