Gut check - Risk OFF Ratio Spiking

2016年2月5日

If you watch the S&P500 or invest in equities, you often want to know what the general trend in the market is and there is one very simple ratio you can watch that alerts you to when the conditions are dangerous. Oddly, the way the market works, however, is that once everyone has sold (or taken enough risk off of the table), the market can then find a bottom.

So, it is that old adage, that it is darkest before dawn, but it is also darkest before it is "pitch black". Meaning to talk on both sides of the fence here because this is the kind of setup where we could accelerate down and if we do, I don't see what is going to stop us at this point.

Investors are moving OUT of HYG (High Yield Bonds) and INTO the safe haven of US Gov't Bonds (TLT - 20 Years Gov't Bonds). This "RISK OFF" ratio is easy to plot and easy to track. I don't know the absolute levels that triggers a specific buy signal, but we are at TERROR levels NOT SEEN SINCE 2009 in the midst of financial market collapse - banks collapsing, brokers and leveraged traders getting wiped out (Bear Stearns, Lehman, AIG, etc).

So, tell me what you think? Are you in enough cash to "sleep at night" or are you still holding "margin long".

Tim

1102 SPX500 3:05PM EST Friday, Feb 5, 2016

2016年2月8日

註釋

1.72 last - Plenty of fear displaying itself with talks of negative rates now in the US too.