This post is a tag along to Bikoo’s post showing the JNK:TLT spread. My charts I believe are revealing the same. The markets topping and decline have been a multi faceted process. One of the indicators that has chronicled the process is the credit spread. Here is the vehicle I prefer to monitor this with. Note how this gave the indication that a collapse was coming. The early August break through of the old high then pullback and retest followed by the resumption of upward trend on August 17th. A one week warning to Black Monday. We now have the 30 EMA showing the trend is entrenched and we can expect a continued advance in the spread which should lead to a market dislocation.


Now lets follow up with a review of the VIX. I will show the daily and weekly chart. The daily shows a pullback to its S&R line, with daily stoch indicating it needs a bit more bottoming action, allowing the market to continue its rally a bit more. Next the weekly shows basically the same, yet with more authority. Here we see the weekly stochastics starting a turn. if it can complete it that will indicate a renewed decline in the market. Also note the 30 EMA of the VIX itself. It is configured in a strong upward fashion. If the VIX broke down through its support line yet stayed above its rising 30 EMA it would continue to be a bearish sign for the markets.



Now if I haven’t gotten your attention yet:

Credit Spreads 2008-2015