Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks, Bitcoin, Gold and Silver Markets Brief - 18th Feb 25
Harnessing Market Insights to Drive Financial Success - 18th Feb 25
Stock Market Bubble 2025 - 11th Feb 25
Fed Interest Rate Cut Probability - 11th Feb 25
Global Liquidity Prepares to Fire Bull Market Booster Rockets - 11th Feb 25
Stock Market Sentiment Speaks: A Long-Term Bear Market Is Simply Impossible Today - 11th Feb 25
A Stock Market Chart That’s Out of This World - 11th Feb 25
These Are The Banks The Fed Believes Will Fail - 11th Feb 25
S&P 500: Dangerous Fragility Near Record High - 11th Feb 25
Stocks, Bitcoin and Crypto Markets Get High on Donald Trump Pump - 10th Feb 25
Bitcoin Break Out, MSTR Rocket to the Moon! AI Tech Stocks Earnings Season - 10th Feb 25
Liquidity and Inflation - 10th Feb 25
Gold Stocks Valuation Anomaly - 10th Feb 25
Stocks, Bitcoin and Crypto's Under President Donald Pump - 8th Feb 25
Transition to a New Global Monetary System - 8th Feb 25
Betting On Outliers: Yuri Milner and the Art of the Power Law - 8th Feb 25
President Black Swan Slithers into the Year of the Snake, Chaos Rules! - 2nd Feb 25
Trump's Squid Game America, a Year of Black Swans and Bull Market Pumps - 24th Jan 25
Japan Interest Rate Hike - Black Swan Panic Event Incoming? - 23rd Jan 25
It's Five Nights at Freddy's Again! - 12th Jan 25
Squid Game Stock Market 2025 - 5th Jan 25

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Credit Markets Point To A Major Stock Market Correction

Stock-Markets / Stock Markets 2011 Aug 12, 2011 - 05:47 AM GMT

By: Tony_Pallotta

Stock-Markets

Credit is like a black box to most retail investors. It's a shame CNBC gives Rick Santelli only 10-15 minutes a day to report on this market. The Fed may set short term rates but the bond market sets everything else. From credit formation that fuels economic growth to interest rates that affect everyone's life the bond market is home to many smart investors and one market you do not want to ignore.


Credit markets have been efficient economic forecasters pricing in the past two recessions well before equities. Once again that little black box is speaking and once again equity investors think this time it's different. This time hedge funds and retail traders think they have outsmarted the bond market.

If asked the question what is fair value of the SPX if the economy weakens would you know? No one knows what "fair value" is yet everyday pundits try and tell us the answer. Credit markets have already priced in economic weakness and using history as a guide the charts below would put the SPX in the 700-800 level.

5-Year Interest rate Swap versus SPX

AAA Corporate Bond Yields versus SPX

Equities remind me of a famous Mark Twain quote.

"When I was a boy of fourteen, my father was so ignorant I could hardly stand to have the old man around. But when I got to be twenty-one, I was astonished at how much the old man had learned in seven years."

By Tony Pallotta

http://macrostory.com/

Bio: A Boston native, I now live in Denver, Colorado with my wife and two little girls. I trade for a living and primarily focus on options. I love selling theta and vega and taking the other side of a trade. I have a solid technical analysis background but much prefer the macro trade. Being able to combine both skills and an understanding of my "emotional capital" has helped me in my career.

© 2011 Copyright  Tony Pallotta - Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in