TED: The One Chart No One's Talking About
Normally I don't post based on market price action. But today's drops across all assets - save for U.S. treasuries - smacked of panic. When you get these big drops, people start selling everything. Hence gold and silver (especially silver) dropped, oil dropped, and on and on.
But the one chart no one's talking about is the chart of the TED Spread. We've posted on this one the last few months. It tells us if we're approaching a liquidity and/or credit crisis, along with a possible stock market correction.
Last time I wrote about TED, I said "in the past, when the TED spread has risen sharply, we saw liquidity dry up, credit tighten and the stock market tank." After that, the spread sank; things calmed down.
But a few days ago, after sinking quickly even as the stock market was going down, it suddenly jumped. Sure enough, the stock market has really taken a hit, culminating in today's 512 point drop.
(You can get a quick snapshot of the jump by clicking here.)
So what's the market telling us? That's always the million-dollar question. One thing I'm looking for - and I don't know if I'll be able to find out or not anytime soon - is whether stocks are correcting, or whether we might be heading into a nasty resumption of the primary bear market trend.
One thing I'm not so concerned about is gold's - and to a lesser extent silver's - sell-off. When you have a primary bull market like gold's been in for the last ten years, you expect corrections and they can be much more gut-wrenching than the sort of drop we saw today before things start bugging you. I'm not saying gold will correct more significantly, but it's gone up so much lately that it really was pretty overbought.
None of this is suggesting any changes in my portfolios at the moment. But that could change depending on what happens next.
But the one chart no one's talking about is the chart of the TED Spread. We've posted on this one the last few months. It tells us if we're approaching a liquidity and/or credit crisis, along with a possible stock market correction.
Last time I wrote about TED, I said "in the past, when the TED spread has risen sharply, we saw liquidity dry up, credit tighten and the stock market tank." After that, the spread sank; things calmed down.
But a few days ago, after sinking quickly even as the stock market was going down, it suddenly jumped. Sure enough, the stock market has really taken a hit, culminating in today's 512 point drop.
(You can get a quick snapshot of the jump by clicking here.)
So what's the market telling us? That's always the million-dollar question. One thing I'm looking for - and I don't know if I'll be able to find out or not anytime soon - is whether stocks are correcting, or whether we might be heading into a nasty resumption of the primary bear market trend.
One thing I'm not so concerned about is gold's - and to a lesser extent silver's - sell-off. When you have a primary bull market like gold's been in for the last ten years, you expect corrections and they can be much more gut-wrenching than the sort of drop we saw today before things start bugging you. I'm not saying gold will correct more significantly, but it's gone up so much lately that it really was pretty overbought.
None of this is suggesting any changes in my portfolios at the moment. But that could change depending on what happens next.
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