Stocks Are Down Just 10%… So Why Are the Powers That Be So Terrified?
Stocks Are Down Just 10%… So Why Are the Powers That Be So Terrified? by Graham Summers – Gains Pains Capital
The Powers That Be are getting desperate.
Yesterday marked the third time in the last FIVE trading sessions that we have a coordinate intervention to prop up stocks. Not only are the exchanges “throttling” the flow of sell orders so that selling pressure doesn’t overwhelm buyers, but “someone” has been placing large orders of stock futures to induce a rally.
You can guess who that “someone” is.
So what is the big concern? After all, stocks are a mere 10% off of their all-time highs after staging the longest bull market in HISTORY. A 10% correction is a healthy thing after a rally of this magnitude.
The Powers That Be are terrified of the below chart.
As you can see, investment grade corporate bonds have broken their bull market trendline and are now barely clinging to CRITICAL support.
By the way, these are INVESTMENT GRADE bonds… as in bonds that SHOULDN’T be in trouble.
If that blue line goes, we’re moving into a crisis as a wave of defaults will begin. With an expected $1.2 trillion in corporate debt at risk of default in the next downturn, we’re talking about SYSTEMIC risk.
Remember, the US financial system is MORE leveraged today than it was in 2007. What do you think will happen to the stock market once companies start defaulting on their bonds (hint: stockholders come LAST when it comes to liquidations).
Here’s a hint.
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Chief Market Strategist
Phoenix Capital Research