One of our favorite technical indicators at Baseline Analytics is a bond "risk-premium" indicator and how its behavior foreshadows shifts in the quity markets. The chart below shows the ratio between of iShares iBoxx Investment Grade Corporate bond Fund (LQD) and the iShares Barclays 7-10 Year Treasury Bond Fund.
Note that movement in this ratio versus its moving average line tends to mark shifts in the S&P 500 reasonably well. In fact, when we add Martin Pring's "Known Sure Thing" indicator (KST) to the ratio, as seen in the lower portion of the chart, you can visualize how bearish and bullish crosses within a KST of the bond risk-premium indicator also mark turning points in the S&P 500.
The bond risk premium ratio crossed above its moving average in March, a bullish development as the S&P 500 gained. Even though the indicator remains above its moving average (purple line), the KST has flashed a warning sign with its bearish cross.
We interpret this development as an increase in the risk of a trend change in equities to the downside, and would take this opportunitiy to hedge long positions with instruments such as e-Mini S&P 500 futures.