This proprietary risk indicator has turned bearish on stocks

From Pragmatic Capitalism:
Our proprietary risk metric is beginning to throw off a warning signal which comes just as the markets are about to enter their seasonally weakest six months of the year.

The risk ratio indicator is a weighted average of bullish to bearish sentiment, the volatility index, the rate of change for the S&P 500, and the new high/new low ratio of the NYSE. This weighted average is then smoothed with an eight week rolling average to eliminate a lot of the noise.

... While a lot of people look at these indicators individually, we combine weight and smooth them to provide a more global look at market psychology and sentiment. Currently, that outlook is very bullish... As a contrarian investment manager, I think this is a time to begin raising cash and hedging risk in portfolios.

The indicator is best used when...

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