I consider the VIX:VXV ratio to be an indicator in the making. Since the VXV is only six months old it is still too early to give it the robust indicator seal of approval, but that doesn’t mean you shouldn’t pay attention to it.

Looking at the chart below, the only previous time the VIX:VXV ration gave a bearish signal comparable to the current one was just as the markets were about to move down in dramatic fashion from late December to late January.

At the very least, the bulls should consider some downside protection in the current market environment. I suspect the bears are preparing to pounce very soon…