Follow Up

The importance of credit markets cannot be overlooked, for equity traders it's much easier to look at Stochastics, Bollinger bands, MACD, take your pick. I have long suspected that the explosion of technical analysis in the late 1990's, (I can remember when it was called "Voodoo analysis" and had no credibility), in my opinion was largely due to pure, unadulterated laziness. Fundamental analysis, which I put zero credibility in because the numbers that go in are flawed to start with, was much more time intensive.

The point being, as technical traders or traders in general, you can never stop growing or learning and although credit is pretty boring, it IS where institutional money has the largest presence due to the immense liquidity.

Credit markets lead equity markets and now, for the first time we have a tool in HYG to look at credit without having to try to second mortgage out homes for a Bloomberg terminal. USE this new edge, it was right on yesterday, it was right on today.

I didn't want to make this chart anymore confusing, so credit is the white price line, SPY is green and as I already have a lot of trendlines drawn here, I added 3 white arrows to show credit DID NOT make new highs with the market, this was a red flag yesterday leading to the overnight massacre in ES as well as the gap and it led to today's drop from a closed gap.

The white trendline shows an area on the SPY of possible support, but before I could even post this, that has been wiped out already.

You are seeing the underlying trend, there was no news that went in to the making of the melt down vs the making of the afternoon ramp, this is what 3C shows, this is what is reflective of the real issues the market faces.