Is Junk Worth More Than Gold?

In Santa Fe New Mexico we awoke with freezing temperatures and fresh snow.

This week the state lifted the current lockdown with restaurants now being able to serve at 25% occupancy outdoors.

I can hardly wait to sit outside on a windy winter day!

The blatant disconnect between state orders and restaurants ability to do business outside is comical.

Similarly, the market could be showing its own version of disconnect.

In the past, we have looked at High Yield Bonds (JNK) to get a picture of the market's risk appetite.

In general, if JNK moves higher, investors are willing to accept more risk.

Conversely, gold (GLD) is seen as a less risky play as investors look for safe places to store money throughout high inflationary periods or downward market trends.

Yesterday GLD confirmed a second day over the 200 day moving average.

Its recent gap up from the 166 low proved that investors haven’t thrown in their golden towel, even with market highs close by.

JNK also performed well closing just under last week's high of 107.85.

If both GLD and JNK continue to move higher it could be showing that while the market wants to continue to new highs, it’s also worried.

Whether it’s worried for longer-term inflation, pending geopolitical stress or a renewed market correction is hard to tell.  Watching the correlation between the two’s performance, especially if they diverge further, could be a great tell for the near term.

S&P 500 (SPYSupport 363.12

Russell 2000 (IWM) Support 10-DMA at 181.04 with 185.44 resistance.

Dow (DIA) Resistance 300. 292.20 support.

Nasdaq (QQQ) 300 new support.

KRE (Regional Banks) 51.07 Resistance. Support 47.22

SMH (Semiconductors) All-time high close.

IYT (Transportation) 225.49 resistance with key support 215 key.

IBB (Biotechnology) Doji Day. Sitting in support around 145 area.

XRT (Retail) 61.40 resistance. Support the 10-DMA at 59.57

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