The Indicators section shows seven numbers Wall Street uses to gauge the state of the market: investor mood, expected volatility, the valuation of US stocks, the slope of the yield curve, the labour market and the price of risk in the bond market. Each number has its own page with history from the first measurement, bands and readings at key moments. This article explains how to read those numbers and where their meaning ends.
What the indicators measure, and what they do not
All seven indicators describe the market as a whole, specifically the US stock and bond market, which sets the direction for European exchanges too. They say nothing about an individual company. A Shiller CAPE of 40 means the S&P 500 index is expensive against its own history; it does not mean every stock in it is expensive. This is exactly where the indicators meet the Fair Price Index: the indicator says how expensive the market is, Fair Price says which stocks trade below their intrinsic value even in an expensive market. The article How to read Bulios Fair Price explains how to read it.
The indicators fall into four groups, each answering a different question:
- Mood (Bulios Sentiment Index): does fear or greed rule the market? The answer holds for weeks.
- Stress (VIX, high-yield spread): how much does the market pay for insurance against a decline and for default risk? The answer holds for days to weeks.
- Valuation (Buffett indicator, Shiller CAPE): how many years of economic output and earnings does the market pay? The answer holds for years.
- Recession (yield curve, Sahm rule): does the bond market expect a slowdown, and is unemployment already rising? The answer holds for months to two years.
How to read the bands
Every indicator has five bands, from calm or a cheap market to panic or a very expensive market. The band edges are not a Bulios invention: they are the thresholds set by the indicators' authors or used by Wall Street for decades, such as 0.5 points for the Sahm rule or a VIX above 30 as nervousness. Each indicator's page says where its thresholds come from.
A band says where the value stands against history. It does not say what happens next month. Three numbers on the page help place the band: the long-term average, the percentile (what share of the history sits below today's value) and the twelve-month range. A valuation percentile of 95 means the market was dearer in only five percent of the months since 1881. That is strong information about the expected return of the next ten years and weak information about the next quarter.
The direction and speed of change is often more useful than the level itself. A high-yield spread of 3.5 % is a normal state; a spread that widened from 2.7 to 3.5 % within a month is a warning. The board therefore shows the change against the previous value and a twelve-month sparkline.
Why indicators do not time the market
The most common mistake is to read an indicator as an order to buy or sell. The valuation indicators have sat in the expensive band almost without interruption since 2013 and the market has tripled since. The yield curve inverted in 2022 for a record two years and the recession did not arrive in the usual window. The Sahm rule lit up in the summer of 2024 and went dark again. The When it failed chapter on every page describes these episodes on purpose: without them a band would look like a traffic light, which it is not.
The right use is different. Valuation indicators set expectations: from the expensive band ten-year returns were historically low, so a plan built on 10 % a year is bold in such a market. Stress indicators say when insurance is expensive and when it is cheap; historically a high VIX was a better moment to buy than to sell. Recession indicators say when to watch the earnings of cyclical companies more closely. None of them says when to sell.
How to work with the indicators on Bulios
The practical routine has three steps. First the board: the status line at the top shows the most elevated band in each group, so one glance tells you whether the market is expensive, frightened or both. Then the page of the indicator that stands out: the chart with band edges and crises shows whether today's reading is exceptional or ordinary, and the key-moments table compares it with 2000, 2008 and 2020. Finally the translation into stocks: in an expensive market the Fair Price Index and the screener find the companies that are not expensive; under stress the button on the indicator's page lets StockBot explain how sectors behaved historically in a similar situation.
The indicators are computed from public data (FRED, Yahoo Finance, Robert Shiller's data) with no manual input, daily or monthly depending on the source. The source and the date of the latest value sit under every chart. They are information about the state of the market, not investment advice; the decision what to do with them stays yours.