Keystone's SPX:VIX Ratio Indicator Signaling Rolling Market Top Behavior Continuing

The SPX:VIX ratio is a Short-Term Market signal, however, the central bankers keep pumping the markets so the rally case lives on. The ratio is now at the same levels as when markets topped in 2007. The ratio was spanked down with negative divergence and the current top is set up the same way. The top in early 2007, however, occurred about one-half year ahead of the actual October 2007 market top. The SPX moved another 100 handles higher for a few months before the big roll over occurred. Things were different back then. In 2005-2006, the real estate bubble peaked and popped, and into 2007, the whole mortgage and banking fiasco unraveled leading to the Fall 2008 market crash.

The purple dots show how the ratio becomes over extended above the 20 MA above the 50 MA above the 200 MA which always identifies a top.  The question is will a topping and smack down in the SPX:VIX directly lead to the broad indexes rolling over or will the SPX continue higher for a little while longer like 2007?  The big difference nowadays is all the central banker pumping. Note the multiple tops over the last there years, all of which are stick-saved by the Fed's easy money printing.  In late 2011 to now, the central banker intervention is globally coordinated as the Fed and ECB teamed up with the Fed's Operation Twist program and the ECB's LTRO1 and 2 programs. Then from late last year into this year, the BOJ has jumped into action yelling "Banzai!!" bludgeoning the yen which has sent the Nikkei, U.S. equities and European equities and bonds higher. The markets are simply a reflection of central banker intervention, plain and simple.

That is why the current topping action is so unpredictable. The red line at 68 is where a crash signal is triggered but the ratio is far above this danger level. The ratio failed 68 (brown circle) for one day the last day of trading last year signaling markets going over the cliff, but alas, the politicians stick-saved the markets by kicking the fiscal cans down the road and beginning 2013 with the strong rally sending the ratio higher again. The green line at 35 signals time for a long market rally but using this signal is probably a year or two in the future. Projection is for markets to top out and roll over to the downside at any time moving forward. Pay attention to the 20/50 MA cross on this chart since that will indicate that the downside direction is real and locked in. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.