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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. ┬áSounds 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). ┬áThe S&P 500 may well be next.

Source: Gluskin Sheff

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