A market concentration and valuation indicator combining Shiller CAPE Ratio with SP100/SP400 ratio to provide insights into potential market movements and sentiment shifts.
Explore complementary indicator rolesHow it works
The indicator calculates two primary metrics: the Shiller CAPE Ratio and the SP100/SP400 ratio. The blue line represents the Shiller CAPE Ratio, which measures long-term market valuation by comparing stock prices to inflation-adjusted earnings. The yellow line represents the SP100/SP400 ratio, which evaluates market concentration by comparing the largest 100 companies to the next 400 mid-sized companies.
When these two lines are analyzed together, traders can observe potential market dynamics. The key signal occurs when the yellow line (SP100/SP400 ratio) crosses below the blue line (CAPE Ratio), which historically has been associated with potential market gains and shifting sentiment.
Why it may be useful
This indicator provides a comprehensive view of market conditions by integrating valuation and concentration metrics. It goes beyond traditional single-metric analysis by combining two powerful indicators that offer insights into broader market trends and potential shifts in investor sentiment.
By normalizing and comparing these metrics, traders can gain a more nuanced understanding of market dynamics. The crossunder signal can help identify potential turning points in market behavior, offering traders a unique perspective on when broader market movements might be approaching.
When to explore it
The indicator is most effective for swing traders and long-term investors seeking to understand broader market trends and potential shifts in market sentiment. It works best in analyzing monthly or longer-term charts where broader market movements can be more clearly observed.
Traders should use this indicator in conjunction with other technical and fundamental analysis tools. It is particularly useful during periods of market uncertainty or when seeking to identify potential long-term market trend reversals or consolidation phases.
Keep exploring
What we’ve verified
Access, alerts and repainting behaviour have not been independently verified for this indicator. Check the creator’s current publication and settings.
General descriptions and classifications are recovered research. Verified details above identify the specific checks we have completed. Check the creator’s current publication for later changes.
