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Corporate Bonds: “The Next Shoe to Drop”

Corporate Bonds: “The Next Shoe to Drop”

“The neckline has been broken over the last few days”

Elliott Wave International

A “calamity” is likely ahead for corporate bonds, says our head of global research, Murray Gunn.

Some of Murray’s analysis involves the head and shoulders, a classic technical chart pattern. In case you’re unfamiliar with it, here’s an illustration along with an explanation from one of our past publications:

Head-and-shoulders refers to a pattern of reversal that is composed of three extremes in price. Market technicians often refer to [them] As the left shoulder and head. …it takes a break of the neckline to confirm a reversal… [and it’s] Not only a bearish reversal pattern. Inverted head and shoulders mark bottoms.

With that in mind, here’s a chart and commentary which Murray provided for the April Global Market ViewMonthly Elliott Wave International publication covering 50+ financial markets

The chart … shows the relative performance of corporate bonds, as proxied by the iShares iBoxx $ Investment Grade Corporate Bond ETF (ticker LQD) versus the iShares 7-10 Year Treasury Bond ETF (ticker IEF). There is a distinct Head and shoulders pattern where the neckline broke over the last couple of days. The corporate…

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