Market Journal: The Signs are There
I’ve written a lot about the bearish divergence between SPX and IG CDX. This continues to play out. Even in the strong bull markets of post-COVID 2020 and back in 2017, bearish divergences with IG CDX ultimately resulted in SPX moving below the level at which the divergence developed. In this case that’s SPX 4700. The Yellen/Brainard put is likely too strong for more than -10% downside, but the signs are there for -10% downside into March 31.
Current IG CDX divergence.
2017 and 2020 examples.
The great Milton Berg providing excellent confirmation a top right here and now.
And just today Cem Karsan reiterated Feb OPEX remains a key window to watch, emphasizing the fact this has been a “market up, VOL up” rally. The IG CDX divergence and Berg’s analysis discussed above only solidifies Karsan’s commentary.
Lastly, inflation is already becoming a problem again with 1-year break-evens quickly approaching 3%.