Jason Goepfert’s SentimenTrader is one of the best resources for online market research and opinion that I have found. He just added a new feature called, “Signposts,” to the site that boils the hundreds of indicators he tracks down to a few, timely ones.
One indicator I found especially interesting in the new Signposts section was his VIX to Treasury ratio. The VIX, which I have written about extensively in the past, tracks volatility in the markets and is a common contrary indicator (lots of volatility means fear in the market and, hence, a buying opportunity). The Treasury market is mostly affected by future assumptions of inflation and growth. And anticipating a recession the rate on the 10-year Treasury bond has fallen to multi-year lows.
The ratio then essentially shows when markets are gripped by fear and pricing in a recession by spiking higher: smells like opportunity to me.
I recreated the ratio in the chart below (thanks to stockcharts.com):
As you can see in the chart, at the recent lows, the ratio hit a level it hasn’t seen since 2002 and 1998 before that. Both of those instances were fabulous intermediate-term buying opportunities. I think this one just may prove George Soros wrong.