Research Excerpts

Are US Stocks Peaking? Watch Credit Spreads.

Posted on: Wednesday, September 18th, 2013

The following (green highlights) is an excerpt from our September 16th Keys To This Week report.

Keys To This Week, one of 8 different reports that we produce for subscribers throughout the month, is a detailed weekly outline of key market factors and corresponding charts pertaining to the US stock market and market sectors, US interest rates, and the US Dollar, that are most likely to influence US financial market direction during the upcoming week.


Excerpt From: Keys To This Week
Asset Class:
US Equities
Topic: Credit Spreads
Date: September 16th 2013

The pink highlights in Chart 2 below point out that periods when the BAA Corporate Bond Spread (Moody’s Corporate BAA Bond Yield minus the yield of the 30-year US Treasury Bond, red line, upper panel) has widened above its 21-day (monthly) moving average, indicating that the market was pricing in an increase in credit or repayment risk for these bonds, closely coincided with every significant decline in the S&P 500 (lower panel) since 2012.

Chart 2

Chart 2

The pink arrow on the upper right edge of the chart points out that the spread is starting to edge back above its 21-day MA average again now which, as long as this continues, should put more downside pressure on the US broad market index.

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Asbury Research subscribers can view our entire September 16th report by visiting our Research Center.