The Market: There's Now an IG CDX Gap at SPX 3929
I don't make the cross-asset market signaling rules.
Discussion
While market participants across the bullish/bearish spectrum continue to buy the on-going SPX dip, cross-asset market signaling continues to suggest stress is building beneath surface. The long-end of the UST and TIPS curves is stress point #1, the USD is probably #2, but the little-discussed CDX market is a strong #3.
I noted Monday that a gap between IG CDX and SPX had opened up around SPX 4046. The problem is markets are not static - as risk-off pressure has built over the course of the week, a new gap has emerged circa SPX 3929.
Further confirmation that a major risk-off event is currently underway comes from advancing volume signal I track but don’t discuss often. Bulls will argue it’s currently oversold, but history suggests the currently sharp negative configuration is a sign of SPX in the early stages of a material correction.