Ted Spread Says Trouble Hitting Markets
The Treasury-Eurodollar spread, known as the TED Spread, just broke through resistance. This may be signaling trouble in world markets. Stocks dropped over 200 points yesterday. Gold and silver were down. Treasuries were up.
A chart of the TED Spread shows it breaking above its 200-day moving average, which is above its 50-day moving average. The last two times this happened, were before the stock market dive in October 2008 and the big correction in April 2010. So don't be surprised if markets reel for a bit.
On the other hand, on a relative basis, the TED Spread isn't as high as it was the last two times it signaled trouble. That doesn't mean it won't head higher. But right now it's starting from a relatively lower level.
We'll have to wait and see whether it heads higher today and early next week. If it does, then I think we're in for some big drops in the stock market, probably in the gold and silver market, and - if things remain consistent with past action - we should see treasuries jump up (yields dive down), especially the 10-year and 30-year treasuries.
As a side note, if treasuries to head up - signaling strong buying of treasuries in their traditional role as a save haven, the U.S. dollar should go higher (that's why gold and silver will go down). This means that, in spite of all the negative press the dollar gets these days, it would still be considered a safe haven by big money in a pinch. So maybe that dollar "collapse" you see in some articles is not immanent after all.
A chart of the TED Spread shows it breaking above its 200-day moving average, which is above its 50-day moving average. The last two times this happened, were before the stock market dive in October 2008 and the big correction in April 2010. So don't be surprised if markets reel for a bit.
On the other hand, on a relative basis, the TED Spread isn't as high as it was the last two times it signaled trouble. That doesn't mean it won't head higher. But right now it's starting from a relatively lower level.
We'll have to wait and see whether it heads higher today and early next week. If it does, then I think we're in for some big drops in the stock market, probably in the gold and silver market, and - if things remain consistent with past action - we should see treasuries jump up (yields dive down), especially the 10-year and 30-year treasuries.
As a side note, if treasuries to head up - signaling strong buying of treasuries in their traditional role as a save haven, the U.S. dollar should go higher (that's why gold and silver will go down). This means that, in spite of all the negative press the dollar gets these days, it would still be considered a safe haven by big money in a pinch. So maybe that dollar "collapse" you see in some articles is not immanent after all.
Comments