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Junk Bonds Wave a Red Flag at Risk

The market should bounce this morning, but after that we’re heading down.

The technical damage from last week was severe with the bull market trendline that has supported stocks since early November being violated on the S&P 500.

Moreover, stocks finished down during August options expiration week in six of the last seven years. So there is also a negative historical pattern for this week.

However, something much worse than all of this is brewing in the financial system. The junk bond market has broken out of a rising wedge pattern that formed since the 2016 lows.

This is a VERY bad sign for risk in general as junk bonds lead stocks. Indeed, based on all of the above, we've got the makings of a SHARP move lower for the markets this week.

You've been warned.

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