One leading indicator for stocks is flashing a warning sign for the market

Several interesting themes have emerged from the bond market recently, most notably in high-yield bonds.

One high-yield corporate bond exchange-traded fund, the HYG, has made some concerning bearish moves lately. Of course, the direction of the high-yield market is much more connected with the stock market than that of investment-grade corporate bonds, so this recent action is of concern to me.

Specifically, I'm watching the high-yield market's substantial underperformance relative to stocks since last summer.

Consider the movement on Monday. Despite stocks' strong rally, the HYG finished the day unchanged. In fact, it's only retraced 25 percent of its sell-off from the January highs, and less than 20 percent from the summer highs.

It is worrisome that after peaking five to six months before the stock market topped out in January, the high-yield market has not behaved well at all. This is quite reminiscent of what took place in 2015, when the high-yield market topped out and began rolling over five months before the stock market began its 14 percent decline into early 2016.

Therefore, if the HYG breaks beneath its February lows and puts in yet another "lower low" in what has now became a series of lower highs and lower lows, that would be a big negative for this asset class. It would be negative development, too, for the stock market.

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