By Jeff Clark, editor, Market Minute The setup in the junk bond market has gotten worse. And, that’s a bad omen from the broad stock market. Last week, we looked at the setup in the iShares High Yield Corporate Bond ETF (HYG). It had just broken below its 50-day moving average (MA – blue line). That’s a bearish development. And, unless HYG could recover right away, it would be a bad sign for the stock market. | Recommended Link | LAST CHANCE UNTIL 2021 Jeff Brown's ground-breaking Early Stage Trader… the research service with an industry-leading AVERAGE 259% gain on closed positions… Is closing down until 2021. | | | -- | Here we are, just one week later, and… well… let’s just say the bad sign is still hanging. Take a look at this updated chart of HYG… 
This chart still looks bearish. HYG is trading below where it was last week. And, the shorter-term 9-day (red line) and 20-day (green line) exponential moving averages (EMA) have crossed below the 50-day MA line. This sort of “bearish cross” often signals the start of an intermediate-term decline phase. It looks like junk bonds are headed lower. And, since the action in junk bonds tends to lead the action in the stock market – by anywhere from two days to two weeks – our stock market is likely headed lower too. It doesn’t have to turn out that way, of course. Nothing is ever 100% certain in the market – especially not this year where we’ve seen so many things that have never happened before. But, when you consider all of the other caution signs – like the persistently low put/call ratio, the premium price of the Volatility Index (VIX) call options, and the seasonal weakness that typically appears this time of year – it makes sense to be a little bit cautious, or maybe even a little bit bearish here. Best regards and good trading, 
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