Junk Bonds Reversal Would Be Bullish For Stocks!

With yields trading at elevated levels and stocks trading at depressed levels, it makes sense that junk bonds are not faring well this year.

BUT they are trying to re-group for a potential rally… and stock bulls would love to see risk-on “junk” rally. They have their fingers crossed!

Today’s chart is a “weekly” chart of the Junk Bond ETF (JNK). As you can see, JNK tested its Covid lows before reversing higher. This bullish reversal has junk bonds attempting to break out of a descending wedge pattern at (1).

Bulls will definitely want to watch this week’s close and look for follow-through next week. A strong breakout would be a positive message for stocks.

(Click on image to enlarge)