Market Correlations

Tyler Durden's picture

Due to the recent abnormal moves in the equity and credit markets, (anything lower should be considered quite abnormal), coupled with a vicious rebound in vol, we present some scatterplots which emphasize just how skewed (overpriced) the S&P is relative to the other correlation measures.

The first chart plots the S&P versus the on the run IG index. As seen from the red highlighted outlier dot, either equities are overprice by about 20 points or IF should be roughly 8 points tighter. As there has yet to be a case where credit is wrong at the expense of equity, look for a prompt 20 point downward correction in the S&P based on credit indications.

An analysis comparing a scatter between the S&P and the VIX shows an even more pronounced divergence from the trendline. If the VIX is correct, equities should be roughly 60 points lower, or else the VIX is overpriced by about 3 points.

Lastly, excluding equities from the scatter picture, and just plotting investment grade credit and volatility shows a much less pronounced divergence. Nonetheless, if the VIX is correct, one should expect a pretty substantial widening in IG credit spreads (which would likely push equities even lower). Alternatively, the VIX is likely overpriced per a knee-jerk reaction and is expected to drop a couple of points, although less than the S&P reading suggests.

With key GDP data out tomorrow, which is poised for a surprise unless Goldman was using dodecatuple reverse psychology, as well as the 50 DMA major technical support level breached, any additional push lower will likely exacerbate the S&P levels much lower as the various scatterplots attempt to adjust to hit recent trendlines. The next few days should be rather interesting from a market point of view.


Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Miles Kendig's picture

Great set up. Thanks.  Time to find out if the market has made a promise it cannot fill.

qrs521's picture

Women in summer would like to become beautiful. Everything can grab other's eyes is their best friends.Products make them beauty and confident is their favourite. Look in the street,you can see many different types of make up to show women's personality.

Welcome to the shop, the following is our products, free shipping.

Soccer Shoes Cheap Soccer Shoes Nike Soccer Shoes Adidas Soccer Shoes Nike Soccer Shoes sale Adidas Soccer Shoes sale UGG UGGs UGG Boot UGG Boots UGG Boots Sale Cheap UGG Boots UGG Boots Cheap Women UGG boots ugg boots cardy ugg cardy boots Nike Air Nike Air Max Nike Air Max Shoes Nike SB Nike Dunk Nike Dunk SB Nike Dunk SB Shoes Nike Shox Nike Shox Shoes Timberland Timberland sale Timberland boots Timberland boots online Timberland on sale New timberland boots Women Bags Women Bags Sale Women Handbags Women Handbags Sale Women New Bags Cheap Bags Cheap Bags On Sale UGG UGG boots UGG boots sale UGG boots short Short ugg Short ugg boots Ugg boots tall New women bags New women bags sale New women bags sale online Louis Vuitton Handbags Gucci bags Nike Nike Shoes Nike Shoes Sale Nike running Nike running shoes Nike trainers Nike trainers shoes Timberland Timberland boots Timberland boots sale Timberland boot Timberland boot sale Timberland boots cheap Men timberlands MBT MBT Shoes MBT Chapa GTX MBT Men Shoes MBT Women Shoes Discount MBT Shoes LV Handbags Gucci Handbags Chanel Handbags Chloe Handbags D&G Handbags Dior Handbags Fendi Handbags Hermes Handbags Jimmy Choo Bags Marc Jacobs Bags Miu Miu Handbags Mulberry Bags Prada Handbags Versace Handbags Yves Saint Laurent Balenciaga Bags Burberry Handbags LV Handbags Gucci Handbags Chanel Handbags Chloe Handbags D&G Handbags Dior Handbags Fendi Handbags Hermes Handbags Jimmy Choo Bags Marc Jacobs Bags Miu Miu Handbags Mulberry Bags Prada Handbags Versace Handbags Yves Saint Laurent Balenciaga Bags Burberry Handbags

Those who want to become most beautiful in the world should try them. Just ones can make you different. Girls who want to grab your boyfriends's heart is necessary to use them.

Fibozachi's picture

The most recent multi-day thrust in the VIX n friends up and out of a fifth-of-a-fifth ending diagonal certainly proved to be quite impulsive over the past few days with a confluence of extremely bullish daily candlestick patterns and a marked re-expansion in average true range.  Today's exceedingly bearish price action and extreme market internal raedings suggest that further trouble lies immediately ahead for equity markets across the globe, which exhibit strikingly similar technical profiles with a multitude of ending diagonals and explicitly rising bearish wedge chart patterns.  On a fourth consecutive down day, today's TICK plotted an enormous amount of negative readings while registering a stunt low of -1422; marking only the seventh time that a tick reading below -1400 has registered since the very onset of Primary wave 2 (circle) began with a single daily High Wave candlestick on March 6th.  While 12 separate occasions of TICK readings that exceeded -1000 plotted over the course of yesterday's impulsive price action, VOLD also spiraled towards its lowest valueu since approximately 10/10/09 and 9/01/09; finding exact support at the trendline that connects the two.

Anonymous's picture


If? More like when it's allowed.


Bear's picture

Two more down days and drop in bonds, we look like Oct. 19, 1987 and feel like 1933.

Anonymous's picture

Yuan gaining currency beyond China

Under the terms of CAFTA, there will be zero-tariff for 90% of the products traded between China and ASEAN countries and "substantial opening" in the service trade market. According to some estimates, the total trade between China and ASEAN members could reach $4.5 trillion once the FTA is launched. The launch of CAFTA will provide momentum for broader regional growth and may facilitate a decoupling from the West, as the yuan plays a more prominent role in the regional economy.

greased up deaf guy's picture

very few technical indicators are volume-weighted, which makes this monster bear rally suspect at best and has led many chartists to dismiss their analysis altogether.

Anonymous's picture

dodecatuple reverse psychology? i'm detecting your sarcasm. lol

convexity's picture

Beware the trap of focusing on the OTR CDX spreads.  The basis has been compressing significantly since January.  i.e. MTD excess returns in cash credit is actually quite positive (92bps) try regressing the S&P against the cash index and you see a pretty over inflated credit market as well.  There are many reasons why CDX is painting a more negative picture.

loderbe's picture

The basis has been compressing significantly since January.  i.e. MTD excess returns in cash credit is actually quite positive (92bps) try regressing the S&P against the cash index and you see a pretty over inflated credit market as well.

Windows 7 key serial windows 7

windows 7 product key

Windows 7 Ultimate

Windows 7 Ultimate Windows 7 key serial windows 7 windows 7 product key Windows 7 Ultimate Windows 7 Ultimate

cheap uggs for sale's picture

It’s a interesting news,i like it.Additionally,wellcome to my website ,here are so many UGGS On Sale such as:UGG Elsey wedge|UGG Elsey wedge black|UGG Elsey wedge chestnut|UGG Elsey wedge espresso|UGG Langley|UGG Langley black|UGG Langley chestnut|UGG Lo Pro Button|UGG Lo Pro Button black|UGG Lo Pro Button blue|UGG Lo Pro Button cream|UGG Mayfaire|UGG Mayfaire black|UGG Mayfaire chestnut|UGG Mayfaire chocolate|UGG Mayfaire sand|UGG Mayfaire red|UGG Nightfall|UGG Nightfall black|UGG Nightfall chestnut|UGG Nightfall chocolate|UGG Nightfall sand|UGG Sundance II|UGG Sundance II black|UGG Sundance II chestnut|UGG Sundance II chocolate|UGG Sundance II sand|UGG Ultimate Bind|UGG Ultimate Bind black|UGG Ultimate Bind chestnut|UGG Ultimate Bind chocolate|UGG Ultimate Bind sand|UGG Ultra Short|UGG Ultra Short chocolate|UGG Ultra Short sand|UGG Ultra Short black|UGG Ultra Tall|UGG Ultra Tall chestnut|UGG Ultra Tall sand|UGG Ultra Tall balck|UGG Ultra Tall chocolate|UGG Suede|UGG Suede black|UGG Suede chestnut|UGG Suede sand|UGG upside|UGG upside black|UGG upside chestnut|UGG upside mocha|UGG Roxy Tall|UGG Roxy Tall black|UGG Roxy Tall chestnut|UGG Roxy Tall chocolate|UGG Roxy Tall sand|UGG seline|UGG seline black|UGG seline chestnut|UGG Corinth Boots|UGG Liberty|UGG Liberty black|UGG Liberty cigar|UGG Highkoo|UGG Highkoo amber brown|UGG Highkoo espresso|UGG Highkoo grey|UGG Highkoo black|UGG Knightsbridge|UGG Knightsbridge black|UGG Knightsbridge chestnut|UGG Knightsbridge grey|UGG Knightsbridge sand|UGG Knightsbridge chocolate|UGG Adirondack|UGG Adirondack brown|UGG Adirondack chocolate|UGG Suburb Crochet|UGG Suburb Crochet black|UGG Suburb Crochet chestnut|UGG Suburb Crochet chocolate|UGG Suburb Crochet grey|UGG Suburb Crochet white|UGG Kensington|UGG Kensington black|UGG Kensington chestnut|UGG Roseberry|UGG Roseberry black|UGG Roseberry sand|UGG Gaviota|UGG Gaviota black|UGG Gaviota chestnut|UGG Gaviota chocolate|UGG Desoto|UGG Desoto black|UGG Desoto chestnut|UGG Desoto chocolate|UGG Brookfield Tall|UGG Brookfield Tall black|UGG Brookfield Tall chocolate|UGG Gissella|UGG Gissella black|UGG Gissella chestnut|UGG Gissella espresso|UGG Payton|UGG Payton black|UGG Payton chestnut|UGG Payton red|UGG Bailey Button Triplet|UGG Bailey Button Triplet black|UGG Bailey Button Triplet chestnut|UGG Bailey Button Triplet chocolate|UGG Bailey Button Triplet grey|UGG Bailey Button Triplet sand|There are so much style of cheap uggs for sale ,so once you go to my website you will be very surprise.

healthelectron's picture

We are the famous handbags manufacturer and handbags factory in china. Supply all kinks of fashionable handbags, customer's designer, size, material, color and logo could be accepted. If you come to our handbags factory, you will be find we are the best handbags supplier in china.

meichou's picture

ugg boots london I saw something shocking uggs london on my way to work the other day. uggs new york While bundled in a long sleeved shirt, wool sweater and coat, with a Pashmina, hat and gloves,ugg boots london sale I saw a man with his bike a the bus stop in SANDALS. He wasn’t overly well dressed for cold weather, in jeans, t-shirt and open jacket. Now, having lived in Oregon for the past decade I have come to be aware of what “true Oregonians” consider winter attire. ugg boots london shop This primarily consists of the inbred belief that flip-flops are a necessity year round, and sweaters and umbrellas are for tourists. I do not uphold this belief.ugg boots sale london I love getting dressed up for winter, layering on leggings with my sweater dress and ugg boots new york, a sweater and a jacket, and a rotating army of scarves, hats and gloves.ugg boots london stockists I don’t enjoy being frozen, especially knowing how easy a situation that is to avoid. uggs new york sale So personally, buy ugg boots london I do not consider myself a “true Oregonian.” I like umbrellas, and only wear flip flops when it’s above 75 degrees.Based on the population of Oregon, ugg new york I’m probably in the minority. Although I have come to accept that these people are just immune to cold in a way I am not, uggs new york of sale I do still think they are crazy. I’m guessing that the good folks at UGG Australia caught wind of these people because look at what they have to offer: sandals with fleece!uggs new york on sale

rashood23's picture

Great post, I have to agree with that this is so Hot & perfect. Thanks you so much. But i prefer more information about this topic.
life experience associate degree AND life experience bachelor degree AND life experience master degree

rashood23's picture

I am absolutely blown away at how great the information is on this webpage. I have written down this website and I truly intend on visiting the site in the next few days. Great job keep up the great work
life experience doctorate degree AND life experience phd degree