Now that the FOMC is behind us, and the result was exactly what we expected: stay the course, most sectors of the market found the obvious as a relief, and the metals rallied, right after I wrote that they would in the last Daily.
Jerome Powell said that most likely the next move won’t be a rate hike, the Fed announced they will slow the decline of QT, the idea of 2% inflation is on a back burner, and now we revisit Operation Twist.
What are the junk bonds telling us?
Junk bonds remain rangebound.
But clearly, the bounce post-FOMC helped market confidence.
However, regarding Chop in May rather than Sell in May (see Real Vision interview), HYG has more work to do as does the market.
The chart shows that HYG still must contend with moving above the pivotal area of 76.50 and the January 6-month calendar range low.
While HYG is holding the 200-day moving average, real motion shows that momentum remains below and in a bearish divergence.
Yet, according to our Leadership indicator, HYG slightly outperforms the benchmark.
We are happy with the green today.
Nonetheless, chop and caution in most equities are still the themes as we begin May.
ETF Summary
- S&P 500 (SPY) Still in a caution phase-500 now support 511 the 50-DMA resistance
- Russell 2000 (IWM) Still in a caution phase-190 support 200-202 resistance
- Dow (DIA) Still in a caution phase 380 support 388 resistance
- Nasdaq (QQQ) Still in a caution phase 430 pivotal
- Regional banks (KRE) 45-50 range
- Semiconductors (SMH) Still in a caution phase 204 Support 220 resistance
- Transportation (IYT) 63 support 67 resistance
- *Biotechnology (IBB) The winner today as it cleared back over the 50-WMA-now must hold
- Retail (XRT) 71.50 support 75 resistance
- iShares iBoxx Hi Yd Cor Bond ETF (HYG) 76.50 pivotal