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This morning’s note from David Rosenberg highlighted 8 alarming trends that he sees in recent market action that could be warning signs of further market weakness:

  • S&P 500 put-to-call ratio jumped to 1.19X last week, the largest weekly jump since August 2003 and the highest level it has been since May 2010.
  • Over the past week, the rotation in recession-protection continued unabated with the S&P 500 consumer staples group up 1.2% and utilities rising 1% compared with a 2% slide in cyclically-sensitive material stocks.
  • The VIX index began last week at 18.9 and closed the week above 21 for the first time in over three months.
  • The dramatic retrenchment in investor risk appetite has taken the Swiss Franc to new highs against the Euro and having strengthened 14% so far in the past year and this recently caused the SNB to cut the Swiss growth forecast for the year.
  • Corporate bond supply has all but dried up – just $4.8 billion of new debt was placed last week in the USA (only $1.1 billion was in high-yield) in the lightest week since early September 2010.
  • Investment grade spreads are far from blown out but they have widened 20 bps from their nearby lows.
  • Spanish bond yields and CDS spreads are starting to reflect some domino effect in this country deemed too big to fail and yet too big to rescue.  Sounds like the Korea equivalent of the 1998 Asian crisis.
  • The FTSE is considered in many circles as a leading market indicator and the 6.2% slide from the highs has taken it below its 200 dma (for the first time since last September).  The S&P 500 may well be next.

Source: Gluskin Sheff

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