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)

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