Visualizing The Real Test For Market Bulls (In 1 Simple Chart)

Tyler Durden's picture

As StockBoardAsset shows on the 24-year monthly ratio chart below, bulls have pushed the S&P:VIX price into uncharted territory this year.

The REAL test for sustained market euphoria is now occurring, as the ratio probes a two decade ascending diagonal (red) line responsible for past market tops.

After 8-9 years of a central bank induced bull market, and pushing +2803% gains from lows, investors are making the fatal decision to get back in, as the final stages are here explained in the ratio.


*  *  *

And for some more color, here are some bonus charts...

On a reward-to-risk basis, investors have not been this 'offside' since 1994...


And remember VIX speculators have never been more short...

And, uncertainty about VIX (VVIX) has never been higher relative to the uber-complacent level of VIX...


And finally, one wonders why, as Small Caps are bid to the moon on the heels of tax-reform-hype, investors are buying protection with both hands and feet...



Is time up?


And all this is happening as the one main driver of global financial markets is dropping the most in a year...

Which does not bode well for stocks...

But then again, it's probably different this time.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Hkan's picture

Beginning of the end..?

Hikikomori's picture

It's the end of the world as we know it EVERY day on ZH!

IH8OBAMA's picture

That S&P/VIX chart doesn't look quite right.  Take a look at this one.


runningman18's picture

The end of the world as we know it has been happening for eight years if you are smart enough to track any other indicator besides stocks.  If all you do is track stocks then you should read MSNBC, not ZH. 

Five Star's picture

When looking at central bank balance sheets you have to also consider excess bank reserves.


FreeShitter's picture

Where's the elusive CTRL-P chart

Hugh_Jorgan's picture

The problem with these analysis ignores the fact that the American capital markets were captured by .GOV, The Fed, and, post 2008. Technical analysis is all of meaningless at this point, ESPECIALLY on the macro scale.

We SHOULD have had a hard reset for the last 50 years worth of all-around bad policy long ago, yet here we are. At some point we WILL count the cost, but attempting to predict it with previous-generation tools and techniques is asinine.

Stuck on Zero's picture

Agree. The next collpase is a Tainter collapse.

scraping_by's picture

Maybe the CBs are counting on Bitcoin (private fake money) to make up for less fiat (public fake money). While the chain puts on limits, there are no limits to rehypothication through derivatives.

hongdo's picture

Block chain doesn't put any limits on anything.  Fork away.  ICO away.

Throw in hacking, fraud and spoofing and there is a lot more 3rd party trust required than I like.  I've been fooling around with Bitcoin and I don't see any anonymity except through using cash ATMs (which have horrendous fees) with a throw-away cell phone  and paper wallets.

And I may be too paranoid, but as to open source code - unless you can read the source and you compile it yourself - it still requires a lot of trust.

Even Trezor has a vulnerability.  And soon as I put my CC on Coinbase I got a call from Chase that it was hacked.  Chase, BTW, is pretty alert and re-issues my cards about every 6 months.

I'd be happy to hear from anybody if I am wrong.  But please be technically specific.


Easyp's picture

What impact does China have on this story?  Has there ever been a point where the worlds second biggest economy is run by a communist government with two stock exchanges trading largely state controlled companies?

Arnold's picture

Give me some leverage and a place to stand.....

Just another lever(age).

Flounder's picture

Waddaya all worried about?  The SP500 corrected yesterday.

CoCosAB's picture

NOTHING WILL HAPPEN until the CENTRAL BANKS stops the printing press... Any comparison with the PAST is just a waste of time!

Osmium's picture

Actually if the CB's continue to print, what will happen next is: NEW ALL TIME HIGHS!!!  

Step right up, everyone is a winner!

Herodotus's picture

The printing is only going to accelerate.

Arnold's picture

My Dymo will print Ludicrous Speed, now where to place the label.
Japanese ETFs? Eurobonds? Chinese dynasty expansion? The new Caliphate? Into whatever the Fed thinks it is doing? Moar Round Stones?

small axe's picture

honey badger syndrome...attacks cobra, gets bit, kills cobra, passes out from poison, wakes up, continues eating cobra ...

DEMIZEN's picture

print they will. stock will rise.

zzzz88's picture

central banks keep printing.

could they print forever?

please explain

Irvingm's picture

Same argument you were giving when Dow was at 9,900 wasn't it?

Irvingm's picture

Another attempt to call a top, 7 years later. From what I can tell the only traders making money in the hedge are the ones following the ShepWave

menchivist's picture

This aritcle here by hedge looks like Shepwave wrote it.  Maybe hedge is getting more of their analysis. Did you see the shepwave updates for Monday?  

The Duke of New York A No.1's picture

The Casino Operators will sell more VIX to keep the sheep in theirs pens ... and so FED balance sheet trimming goes smoothly.



bentaxle's picture

As Boris Alotovkrap would say, is time for Bullard show to us his bottom.

Liberaldisdain's picture

What really matters is bulls have been long since 2010, and ZH contributers have been short.......suckers. MAGA!

adolphz's picture

When turns bullish we turn bearish has become the single best ever contrarIan indicator EVER, PERIOD!!!!;


Iconoclast421's picture

According to that chart we should see one more big blowoff top.

Let it Go's picture

With the markets sporting a glow from all-time record highs that are being made week after week it might be a good time to revisit the concept of irrational exuberance. We must consider the possibility we may be nearing the end of a 37-year run that will completely upend everything most people have come to believe about the economy. Since 2008 all growth has been built on a mountain of debt.

Those of us who have doubted and repeatedly predicted the collapse of this so-called recovery remain wrong because we have underestimated both the breadth and size of the global intervention of central banks and governments. Nobody in their right mind would have ever anticipated the sheer magnitude and scope of what has become a worldwide phenomenon. The article below questions when the burden of global debt will cause Atlas to shrug.

Vlad the Inhaler's picture

The VIX formula was changed in 2014 so the figures are a little skewed.  For historical reference you can use $VXMO instead.

seattleslewsz's picture

Looks like the Shempwavers are willing the battle of the markets.  They are the ones getting them right.

repetae's picture

Interesting recent quote from the CBOE blog on a Fed survey on uses of volatility: "The belief of the popular press that short volatility is a ‘crowded trade’ may require a second look after seeing the Fed survey results." Half of the responses said most clients are net long.

The CBOE blog post: