- Signals derived from our U.S. equity models have been flipping to a bullish outlook since March. Equity trends, volatility and credit spreads are generally positive.
- However, last week, credit default swaps on investment-grade debt ticked higher. CDS are notoriously twitchy, and the current reading (up 3% in the last month) is marginal to be sure, but this signal represents a warning sign worth considering. BBB credit spreads, the TED spread and other credit quality indicators are so far not confirming the CDS’ early warning sign.
- Global breadth continues to improve. Currently 12 out of the 45 country ETFs we track are positively trending and thus ranked “1” by our Trend1 model, up from 11 last week and just four in July.
 The TED spread measures the difference between the yield on the 3-month Treasury Bill (T-bill) and the value of the eurodollar futures contract—which is based on the 3-month LIBOR rate.
Argentina (ARGT) joined the global reflation trade, bringing the number of global equity markets scoring a “1” on our Trend1 model to 12 (27% of the 45 markets we track).