At The Close by Sarp Cercioglu
Although a general understanding of the intermarket dynamics between the credit and equity markets exists in the investment world, it really hasn’t gone beyond the axiom of “What’s good for bonds is bad for stocks and vice versa.” The global credit crunch over the past 18 months or so, however, brought the credit markets to the front burner of news, and as a result, these days, not many people are left who haven’t heard of Libor when just a couple of years ago, hardly anyone outside of the credit markets knew about it. The same applies to credit default swaps.
When we take a look at the credit market indicators from a technical perspective, we see strikingly strong connections to the equity markets. I will delve farther into the complex relationship between the credit markets and equity markets and explain how we can use technical analysis to take advantage of this connection.