Our credit stress detector tracks the IEI/HYG ratio (Treasuries vs. junk bonds) and measures what SPY and QQQ do after the spread hits extreme levels.
2,512 trading days. 267 two-sigma events. 10 years of data.
Here's what we found:
When credit stress spikes to +2σ (flight to safety), equities rally hard over the next 45 days:
SPY: +4.81% avg return, 73.4% win rate
QQQ: +7.13% avg return, 80.4% win rate
IWM: +4.51% avg return, 69.6% win rate
The March 2026 Iran shock hit +2.69σ on March 6th.
45 days later:
SPY +9.95%
QQQ +18.93%
IWM +13.73%
The signal caught the exact bottom.
But here's where it gets interesting.
When the ratio flips to the other extreme (z ≤ -2σ, peak risk-on), small caps diverge:
$SPY: +0.89% avg, 63.4% win rate
$QQQ: +1.66% avg, 63.4% win rate
$IWM : -0.01% avg, 37.8% win rate
82 events over 10 years. Large cap absorbs the flow at risk-on extremes. Small caps get left behind every time.
Current reading: -1.59σ. Risk-on, but not extreme.
The data says stay long SPY and QQQ. Underweight IWM until credit stress returns.
When does the next credit stress event flip this signal? That's what we're watching. $IEI $HYG
If you turned President Xi Jinping upside down and shook him, Mauritius would fall out of his pocket.
We cannot let the UK hand over our shared military base on Diego Garcia to China’s BFF.
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@JustinPulitzer@The_Real_Fly Yeah these European leaders are the epitome of dumbness. How in the world can you get so energy dependent on your adversary and basically financially support them but at the same time put sanctions on them. They are clearly sending conflicting messages to Putin the chess master.