Should Bond Holders Head for the Hills?

August 01, 2014   |   August 2014 Bond Updates
The stock market's seemingly neutral performance on Wednesday-in spite of the surprisingly strong GDP numbers-masked further technical deterioration. The Asian markets were mixed but the European markets are generally lower. The futures are showing sharp losses in early trading with the Dow futures down 90 points. A lower daily close on Thursday will trigger stronger sell signals and a weekly close in the S&P futures below 1959 will trigger a weekly low close doji sell signal. The sagging action in the stock market after the FOMC announcement shifted the market scales to the sell side, as was discussed Wednesday. This was the reason I Tweeted a recommendation for traders to buy an inverse ETF, the ProShares Short Dow30 (DOG). There was also some important action in the bond market as yields reversed to the upside. Last week, I noted that the yield on junk bonds had broken their downtrend (see chart). Recent data from Lipper reports outflows of $2.4 billion from high yield bond funds. This is similar to what occurred in May 2013 as yields completed a significant bottom formation. This makes it important that bond holders examine the risk of their bond ETFs and funds. A look at some of the key bond ETFs does reveal some new opportunities that would benefit from higher bond yields.

View more at: http://www.forbes.com/sites/tomaspray/2014/07/31/should-bond-holders-head-for-the-hills/
 
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