TED Spread Update: Crisis Coming?

Continuing with the TED Spread, it looks like the chart now clearly shows the TED Spread breaking definitively above its 200-day moving average. I've been waiting a few days as old TED wobbled above and below. Then last week it looked like it broke above for good.

But there's no absolute way I know of to be sure. So I subscribe to the idea that if the item stays above (or below) it average for at least 3 days, it's a good bet it's made a significant move. It's bee 5 days, so that's what I'm going with - that the TED Spread has definitely broken through upper resistance of the 200-day moving average.

Now the next event to look for is whether the 50-day MA breaks above the 200-day MA, which is the trend you see on the chart. And it's almost certain that will happen in the next few days. Once that happens, it shows a strong trend up for the TED Spread.

I'll talk more about exactly what this spread represents soon, but for now the main point is that in the past, this sort of action has signaled some sort of crisis coming.

Sure enough, the news this morning is that Portugal has officially told the European Union it will need bailing out. Maybe that will be the catalyst to start things moving to crisis mode. Maybe not. The Portuguese say they'll need $129 billion. But remember these initial estimate are always low. The central banks never tell the whole truth at first (if ever).

And in the article I read, the comments were that while this is significant, it's still just one of the smaller countries in trouble. For example, if it were Spain, that would be really significant. But the article says Spain's got a strong economy and won't need bailing out. Do you believe that? Hmmm...

We'll keep monitoring and you can be we'll be back to this story soon.

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