MUT is making all-time new highs as this rally sucks in more gullible investors into junk bonds. As I have said before, MUT is the “cream of the crop.” Investors in this index have fared better than in most junk bond funds.

The sad part about this is that MUT is on a similar Cycle pattern as SPX. In other words, it may be about to join SPX in a panic Cycle decline next week.

Investors in JNK have fared much worse until this month.

ZeroHedge writes, “It seems like only a blurry, distant memory but February 11 - the day the S&P hit its 2016 lows - was just over 4 weeks ago. In the subsequent 4 weeks, the market has unleashed one of the most furious short covering/record corporate buyback/central bank easing-driven "risk on" rallies ever, and nowhere is this more obvious than in recent inflows into credit markets (the same bond market which just one week ago the ECB made "risk-free" by announcing it would monetize corporate bonds for the first time ever).”

While this rally may have salved investors’ losses over the past year, they are not entirely recovered. A simple reversal beneath mid-Cycle support at 34.57 may leave JNK in the position of having to completely retrace the rally, and then some.

Regards,

Tony

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Disclaimer: The content in this article is written for educational and informational purposes only. There is no offer or recommendation to buy or sell any security and no information contained here should be interpreted or construed as investment advice. Do you own due diligence as the information in this article is the opinion of Anthony M. Cherniawski and subject to change without notice.

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