Deep in the Tranches

Deep in the Tranches September 20, 2026

TECHNICAL STRATEGY CCC Spreads at Multi-Year Wides Jonathan Krinsky, CMT WHAT YOU SHOULD KNOW: ( Once again if looking just at the S&P 500, you would think the surge in energy prices and rates has had little impact over the last few months. Yet under the surface, NYSE downside volume as a percentage of total volume (20 DMA) has surged back to 54%, near YTD highs, and small-caps are off more than 5%. Since 1996, this is the 12th time this occurrence has happened. While the forward returns are mixed for SPX, they are particularly negative for RTY, with average and median 40-day returns both -2.1%. Further, once again we have some ominous dates for bigger cycle tops including March 2000, November 2007, and November 2021. While most credit spreads remain subdued particularly relative to treasuries, the riskiest tranches (CCCs) are starting to blow out. In absolute terms, CCC spreads are above 9%, the widest since 2023. Relative to Bs, spreads are well above 6%, a threshold that has historically coincided with more meaningful index drawdowns. ■ Downside Volume Back to YTD Highs. NYSE downside volume as a percentage of total volume (20 DMA) has surged back to 54%, near YTD highs. Yet unlike March when SPX was ~9% off highs, it’s currently only 3% away. Small-caps are off 7%, but that’s also less than the -11% drawdown they saw in March. ■ What Does it Mean? Since 1996, this is the 12th time the 20 DMA of NYSE downside volume > 53%, SPX within 3% of an all-time high, and RTY > 5% below a 52wk high. While the forward returns are mixed for SPX, they are particularly negative for RTY, with average and median 40-day returns both -2.1%. Further, once again we have some ominous dates for bigger cycle tops including March 2000, November 2007, and November 2021. ■ Deep in the Tranches. While most credit spreads remain subdued particularly relative to treasuries, the riskiest tranches (CCCs) are starting to blow out in absolute terms and relative to Bs. Spreads are wider than they were at the depths of the ’22 bear market! ■ Small-Caps Reacting to Spreads. Small-caps (RTY) relative to large-caps (SPX) appear to have noticed the widening CCC spreads with the ratio falling over 8% since late June. ■ Move Up in Quality. Consumer High vs. Low quality peaked in August and is now breaking lower multi-month lows. Makes sense to move up in quality. ■ Still No Fear. 10-DMA of put/call ratios still bumping along near YTD lows. ■ Bitcoin Impressive. We previously thought Bitcoin needed to retrace back towards the ~69k level. While it did break below 75k last week, it quickly reversed and is now back near recent highs. That sort of reversal should be respected, and as long as 75k now holds, bulls can target a push through 82k on the way to ~90k.

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Downside Volume Back to YTD Highs

TECHNICAL STRATEGY • NYSE downside volume as a percentage of total volume (20 DMA) has surged back to 54%, near YTD highs.

• Yet unlike March when SPX was ~9% off highs, it’s currently only 3% away.

• Small-caps are off 7%, but that’s also less than the - 11% drawdown they saw in March.

Source: BTIG Analysis and Bloomberg. BTIG, LLC Jonathan Krinsky, CMT (