With yields trading at elevated levels and stocks trading at depressed levels, it makes sense that junk bonds are not faring well this year. But they are trying to re-group for a potential rally, and stock bulls would love to see a risk-on junk rally. They have their fingers crossed.

Today’s chart is a weekly chart of the SPDR Bloomberg High Yield Bond ETF (NYSE:).

JNK Weekly Chart

As you can see, JNK tested its COVID lows before reversing higher. This bullish reversal has junk bonds attempting to break out of a descending wedge pattern at (1).

Bulls will definitely want to watch this week’s close and look for a follow-through next week. A strong breakout would be a positive message for stocks. Stay tuned