This credit-market signal is kind of interesting—the risk is that the shorts may be pressing their bet incorrectly and that there’s upside rebound risk for corporate bonds, so it feels like we need to closely track changes in the yield spread.

Ciptonet says the credit market issued its first warning since 1998, as S&P 500 profit forecasts are expected to surge 24%. Bull Theory says dealers are net short corporate bonds for the first time, at about $4 billion, with their credit exposure already exceeding their positions; shorts of $13.7 billion for maturities of five years and above, and credit spreads are at multi-year lows. If corporate bonds rebound, dealers may be forced to close positions, triggering rapid market volatility.