Friday, February 8, 2013

SPY vs. JNK: this week food for thought


  1. Are you saying JNK could be a leading indicator for SPY for the next couple of weeks ?

    1. Hi,
      I do expect a correction in SPY, but I have to say I have been expecting it since a couple of weeks ago.
      I take the SPY/JNK divergence as another sign that SPY is extended, but you know how the say goes "the market can stay irrational longer than you can stay solvent".
      The fact that SPY (and all major US indeces, like Dow Jones and R2K), are nearing or breaching multi-year highs and every would-be retail trader is seeing it and trying to short them, is for me a warning sign that there is still too much fuel to extend this market higher(i.e. weak shorts to be squeezed, forcing them to capitulate and buy at higher highs, fueling more up-trend).