HYG-TLT Ratio Breakout

New all-time high. The argument for a breakout is that we get a sovereign debt crisis that takes U.S. government bonds down more than corporate bonds, including junk. HYG also leading against investment grade bonds in LQD though. That only makes sense if the economy is much stronger than the data reflects. Place you bets.

With dividends stripped, the ratio also broke out.

A case can be made for HYG outperforming TLT in an inflationary environment that is also strong economically. The converse view is the oversold reading suggesting a reversal. HYG is sitting above long-term support, while TLT and LQD have broken down. As a ratio trade, I'd look for a reversal in the ratios. Whether that is more long TLT or short HYG I can't say for certain, but I'm buying puts on HYG.

Tight stops. I expect a downside move to be almost immediate.