RI: Markets become scary: Crash point or turning point?
We cannot remember having seen so many markets at critical points simultaneously. It is truly astonishing. Scary movie or turning points? We do not know for sure, but let’s review the strategic assets in order to get an understanding of the likely scenarios going forward.
First and foremost, the TED spread is about to cross a critical resistance level. We look at the TED spread as a fear indicator, a signal that a correction is coming. The steady rise of the TED spread since last summer is not a healthy signal. The trillion dollar question is how far it will go, and which markets it will hit.
If anything, the stock market seems to be the best candidate for a severe correction. Purely from a trend perspective (without engaging in technical analysis), it seems that the broad markets have lost momentum, as evidenced by the S&P 500 momentum (RSI) versus price divergence. For now, it seems that the path of least resistance will be lower.
