SPDR S&P 500 ETF TRUST
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Vol expansion signaling the top is near, but $HYG disagrees

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Through my previous "big picture" posts about VIX/VVIX and VIX as well as high yield corporate bonds (HYG or JNK respectively) I have been maintaining we're in that end stage of a bull market, but for now to "keep buying the dip."

Things are getting a little shakier lately, but I still feel like new highs can be made based solely on how HYG is still behaving.

We have higher lows and lower highs starting on VIX, which is usually a good indicator we're near the cycle top. HYG is not far off setting a new high from this cycle, though. Highest it's been since the big sell off started in 2022. HYG never recovered its 2021 levels.

So, solely based on past performance of how HYG often sets lower highs preceding a longer term bear market in equities, I'm going to stick my neck out and say despite the economic data supporting slowing and VIX starting to set alarm bells in its pattern, we're not quite yet to the top.

Equities kind of have the appearance of having done a double top and might continue down according to how some interpret candlestick patterns, but the unusual strength of HYG gives me pause and say "maybe buy the dip isn't dead just yet."

Make no mistake, though, we are certainly much closer to a market cycle top than we are the bottom. And tech has been getting battered pretty solidly. I just think the price action of the main indices themselves may yet set new highs before we do finally enter a longer term bear market. It absolutely is time to be on your toes. Things are shifting underneath us.

But my bold prediction is that buy the dip for SPY SPX isn't dead just yet. Bulls may have another rally or two left in them to hit another all time high before bears totally take over. I do think some larger players have already begun shifting out of equities and into treasuries, once that settles down a little, we'll see stocks make maybe one or two more big pushes, take a look at what HYG is doing during that time and go from there.

With that said, I have no prediction for how far and deep the current dip will go. September has a history of being one of the uglier months of the year. I had thought that yesterday might be the low of the current dip with HYG showing two decent days of bullish divergence, but then we got smacked lower still today after a rebound from yesterday's lows.

The market has a way of humbling you for sure! But if you're just long term long SPY/SPX, I say stay there for now. I think we might have some more highs to set yet--but not many more before a big drawdown does happen.
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HYG is now showing a solid bearish divergence while SPX is attempting to recover from the recent dip.

Maybe SPX makes one more all time high before we enter a bigger bear market? That's my read on the situation at least, but for sure, high yield corporate bonds are now starting to sound the alarm from the looks of it.

This bull market is not long for this world.

Of course, keeping in mind that bear markets tend to be a lot shorter than bull markets. 2025 may be a rough year, but 2026 could be a turnaround depending on what economic data trends look like.

We'll see! Obviously with the election, it's an additional unknown with what policies make it through and what ultimate effect they may have, but it's easy to argue that stocks are not very confidence-inspiring as the place to be right now.

TLT, however, might be... Bouncing off recent lows, 30 year bond yields having not quite gotten to their highs from 2023 and just recently having barely pipped 5% once more before starting to go back down, maybe treasuries are a better place to be than stocks from here.

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