Lesson 1: The Bond Market’s Secret Key to Predicting Stock Rallies

How a High-Yield Bond ETF Can Give You a Head Start on Stock Market Gains

To Smart Investors,

It took me a long time to start writing this guide for a reason.

It’s extremely difficult to transplant decades of trading experience into a few articles that will be accessible enough for you to read and absorb the knowledge.

There is a reason why almost everyone lost money on December 18, 2024:

While I did this:

60% in 1 day in a bear market.
I trade options that are inherently risky.
We will get there with time.

Welcome to the first lesson in The Guide, a series in which I will explain the exact methods and tools I use to identify profitable trading opportunities.

My aim is to show you where I find my edge and to give you a transparent, step-by-step process so you can understand why I make certain decisions and how you can apply these insights independently.

In these lessons, I’ll explain the strategies I use daily—everything from my go-to leading indicators to how I manage my trading room signals to advanced tools like my personal TradingView indicator and upcoming SaaS platform that monitors options flow and institutional activities.

Each lesson will build upon the last, so by the end, you’ll have a comprehensive roadmap to becoming a more informed and profitable trader.

Today, we start with one of my personal “secret weapons” for gauging the market’s mood: the iShares iBoxx High Yield Corporate Bond ETF, better known as HYG.

Let’s explore how HYG can help you predict bullish moves in the stock market—often before they happen.

I don’t recommend shorting stocks. Unless you’re an expert, you'll be better off identifying bullish days and trading only on those days.

Why HYG Is My First Stop Each Day
When I sit down to trade, I want to know if it’s a good day to look for bullish setups.

Before I even check the S&P 500 (SPY) or my list of favorite stocks, I look at HYG.

Here’s why:

1. It’s a Window into Institutional Sentiment:
   HYG represents “junk bonds,” which are higher-risk corporate bonds.
   These bonds attract big, sophisticated players—hedge funds, asset managers, large banks—who deploy capital based on their outlook for credit conditions and corporate health.
   When these institutional giants start scooping up HYG, they’re essentially making a bet that economic conditions are stable or improving.
   If they’re optimistic about companies paying their debts, chances are they’re also optimistic about equities.

2. It’s a Leading Indicator for Risk Appetite:
   The bond market often moves faster and more subtly than the stock market.
   Watch HYG for sudden strength—higher lows, breakouts, or resilient price action—while SPY still catches its breath.
   This “lead” effect can happen hours or even a day before SPY moves, allowing you to get positioned early.

3. It’s the Foundation of My Trading Routine:
   Before I open my Telegram channel to check the Signals and adjust any positions based on my TradingView indicator, I check HYG.
   If HYG shows bullish tendencies, I know I have a green light to look for long setups on SPY and higher potential on individual stocks that respond well to overall market momentum.
   On the other hand, if HYG looks weak or uncertain, I may take a step back and trade more defensively—or not trade at all that day.

How HYG’s Moves Predict the Stock Market
The logic is straightforward:
If institutions are willing to buy riskier corporate debt, they’re showing confidence in the market environment.
This sentiment often “spills over” into equities.
Seeing HYG move up when SPY hasn’t caught on is like getting a friendly heads-up that a bullish wave might be just around the corner.

Key Signs to Watch For:

• Divergence: If HYG starts pushing higher or at least stabilizes while SPY remains flat or slightly negative, that can be a clue that the equities are about to follow.

• Relative Strength: Notice how HYG recovers from dips. If it keeps bouncing back quickly, it suggests strong underlying buying interest—one that could soon ripple into the stock market.

Visualizing HYG vs. SPY on TradingView
Understanding theory is one thing; seeing it play out on a chart is another. Here’s how to set it up:

• Chart Setup:
  Open TradingView and split your chart horizontally into two panels:

  • Top Panel: SPY (daily, hourly, or even 15-minute timeframe, depending on your trading style)

  • Bottom Panel: HYG (same timeframe as SPY)

    

  • Check the four bottom Syncs in Layout to ensure that both of your graphs are always aligned: interval, Crosshair, Time, and Date range.

• Example 1. The dreaded December 18:

  

  SPY started crashing on December 18th at around 6:30 p.m.
  
  On Friday, December 13th, HYG had a huge red candle. Later, it bounced, and smaller red candles appeared before SPY crashed. 
  
  This means that institutions were moving money to bonds.

• Here you can see how HYG predicted a SPY reversal 4 hours before it happened:

  

Putting It All Together: A Simple Daily Process

1. Check HYG Before the Open:
   Is HYG trending up, holding support, or showing any sign of bullish divergence? If yes, lean towards a bullish bias for the day.

2. Confirm with Other Indicators:
   Use my TradingView indicator to confirm that buying pressure aligns with HYG’s signal. Check my Telegram signals to see if I call out long setups or specific entry points.

3. Look for Institutional Clues (Future SaaS):
   When the SaaS platform launches, examine options flow and large block trades. If these align with HYG’s bullish undertone, you have a stronger case for investing in the markets.

4. Execute Trades with Confidence (But Not Overconfidence):
   Even with HYG’s lead, remember that no indicator is perfect.
   Proper risk management—position sizing, stop losses, and profit targets—can help you capture the upside without exposing yourself to undue risk.

Why Focus on the Bullish Side?
I prefer to show people how to make money in bullish conditions because there’s plenty of opportunity in uptrending markets.
While short selling can be profitable, it requires different risk management and often more advanced tactics.
Most of my strategies emphasize capitalizing on the market’s natural upward bias over time, especially when institutions, as reflected in HYG, signal their optimism.

HYG is my daily “secret handshake” with the market.

Understanding how the stock market moves and what it represents can give you valuable insight into its future. 

Combine this knowledge with my Telegram signals, TradingView indicator, and (soon) SaaS platform for an even clearer picture of the market's direction.

This is just the first lesson in The Guide.
I will try to publish a lesson every 1-2 days from now on.

In the next lesson, I will show you how to not only use the Signals from my Telegram channel but also how to find valuable equities using the TradingView screener.

God bless you and your Family,

Jack Roshi, MIT PhD