One of my favorite indicators is the ratio of the Nasdaq 100 to the VIX. This measure has been very powerful over the years in saying that trouble was coming for a bull market was forming. As you can see from the chart, this manipulated ratio (using moving averages) rolled over in early 2007 following the dive by the Shanghai comp. The S&P would bounce but it indicated trouble was coming. The ratio also turned up in July of 2009 confirming the other indicators that showed a bull market was in full force. Recently the indicator dipped but has since turned following the most recent move higher in stocks. A higher high was registered on the indicator which argues that volatility is either stuck in the mud to lower and stocks are either stuck in the mud to higher. IN any event, it argues that the bull market is still in force.
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