Now that we are one day into the new year, there are two pieces of advice to give you.
- Learn a strategy and then become a specialist in that strategy. As an example, you could use phases. And once you understand the phases on a daily and weekly timeframe, you may find that your trading will vastly improve.
- Get in the habit of following bonds. Sure, short-term bonds work well as do the 20+ year-long bonds. However, we are all about the high yield high debt junk bonds. We basically use the bonds to determine risk on/off. And we find that quieting the noise, especially with the dreary forecasts for this year, helps us trade a lot better.
The chart of the iShares iBoxx $ High Yield Corporate Bond ETF, HYG and the SPDR Barclays High Yield Bond ETF JNK have been excellent guides to the short and long-term market moves. It also keeps you out of harm’s way during the chop. Let’s focus on the chart of HYG (see chart 1).
In June 2022, HYG bottomed. So did the market. Then, HYG had a phase change in July but could not quite get going enough to clear the 200-day moving average (MA). And so, the market sputtered. Then, the sharp reversal candle in October gave traders a good bottom risk point. The ensuing rally took the price right up to the December high and the 200-day MA.
Currently, HYG sits right under the 50-day MA. It also closed green on a red day in the indexes. That tells you that risk appetite remains, regardless. HYG outperforms the SPY, and the momentum had a bullish cross while the momentum trades above the moving averages. And, most importantly, it tells you to watch that 50-day MA carefully.
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- S&P 500 (SPY): 375 support and 384 resistance.
- Russell 2000 (IWM): 170 pivotal support and 175 resistance.
- Dow (DIA): 325 support and 334 resistance.
- Nasdaq (QQQ): 260 support and 267 resistance.
- Regional banks (KRE)): 56 support and 61 resistance.
- Semiconductors (SMH): 196 support and 205 resistance.
- Transportation (IYT): 210 pivotal support and 215 now resistance.
- Biotechnology (IBB): 127 is pivotal support and 133 overhead resistance.
- Retail (XRT): 57 pivotal support and 63 now resistance. Holding 60.
Director of Trading Research and Education
Mish Schneider serves as Director of Trading Education at MarketGauge.com. For nearly 20 years, MarketGauge.com has provided financial information and education to thousands of individuals, as well as to large financial institutions and publications such as Barron’s, Fidelity, ILX Systems, Thomson Reuters and Bank of America. In 2017, MarketWatch, owned by Dow Jones, named Mish one of the top 50 financial people to follow on Twitter. In 2018, Mish was the winner of the Top Stock Pick of the year for RealVision.