Monday, March 9, 2009

DoctorMad Update – Grind Lower with Credit Leading the Way…

Our General has the trenchlines drawn in on all his battle maps… Guard this intel with your life if you wish to bring your troops home safely too!
What's there to say about today that couldn't be said about any day the past 3 weeks? Not much. The bears still have the momentum and continue to grind lower.

I'm still waiting to pull the trigger on the final retreat for the last of my bear troops. At this point in the move, I now have the important trenchlines representing the bearish momentum in just about every major sector and index. I included charts of the RUT, NDX, and DJT. A break north in any of the major indexes and they are all likely to go down.

I also included a chart of LQD. An "investment" grade bond ETF. Credit got slammed today far harder than equities. Credit has also lead and been correct every step of this bear market so far.

- DoctorMad

Great battle maps, Doc, thanks for sharing. Interesting chart of LQD. When looking at a one year chart of LQD, it struck me that it looked like an inverted version of the VIX:

So, I inverted it and put it below a one year chart of the VIX. Not a perfect match, but hey, maybe this is almost a better fear indicator for where we are?

So, to see the correlation, I placed the VIX against the SPX… here we find that there’s a divergence on this last leg down:

And when I place LQD behind the SPX, we also find a divergence, but it’s actually more directional of late than the VIX:

Interesting, thanks for sharing, Doc!