Oil Turmoil

 Anyone recently filling up at the gas pump or getting an oil delivery to heat their home for the winter is spending less, a lot less, thanks to plunging oil prices. The cost per barrel of West Texas Intermediate Crude is now 55% lower than on June 13, 2014. Momentum is to the downside with losses in 22 out of the past 29 days. Wall Street seems to be having a tough time figuring out if low energy prices are good or bad for investors – the stock market is off to one of its worst starts to the year. But economic forecaster IHC Global has little doubt that Americans are better off with oil at$40 per barrel than $80 per barrel. Click charts to enlarge.

♦ Please note that my readings will change without notice,  so please don’t buy or sell solely based on anything you read in this blog. ♦

Oil hitting high yield bonds

HYG OILIn today’s StockCharts.com commentary, Arthur Hill sheds some light on what’s plaguing high yield bond ETFs lately: sinking oil prices. He points out that iShares iBoxx $ High Yield Corporate Bond (HYG) and SPDR Barclays High Yield Bond (JNK), the two biggest players in the high yield bond ETF business with a combined $23 billion in assets, each have large stakes in the energy sector. And with oil prices in a free-fall, HYG and JNK are feeling the impact. Note the strong correlation in my chart of HYG (without dividends) and crude oil – click to enlarge. Both topped out in June and have been declining together.

My newsletter’s timing model for US High Yield Bond Funds generated a sell signal on September 15, quickly reversing an August 29 buy signal.

 ♦ Please note that my readings will change without notice,  so please don’t buy or sell solely based on anything you read in this blog. ♦