New Signals from High-Yield Bonds and Healthcare and Industrial Sector Insiders

Key points:

• Despite recent market weakness and geopolitical tensions, the major indexes continue to hold above their respective long-term moving averages. We cannot predict if, or how long, this condition will last. But as long as the trend can objectively be identified as favorable, it makes sense to look for buying opportunities
• As the character of the market changes - especially later in a bull cycle - focusing on individual sectors can be beneficial versus simply buying and holding an index fund
• Recent favorable signals have been flashed by high-yield bonds, as well as insiders in the Healthcare and Industrial sectors

A trading signal from high-yield bonds

High-yield bonds have a much higher correlation to stocks than to treasury bonds. As a result, trend and overbought/oversold indicators for high-yield bonds can often flash useful signals for stock investors.

For example, the High-Yield McClellan Oscillator recently bounced off an extremely oversold level. This has historically been a favorable sign for stocks. The chart below shows all dates when the High-Yield McClellan Oscillator