What the Crash Indicator Read Before the Midterm Rally
Before the midterm rally this site's Crash Indicator showed low stress and high valuation: credit spreads were tight and unemployment signals quiet, while the Shiller CAPE was 40.1 and insiders sold 745 times against 92 buys in 90 days. The readings below predate Wednesday's rally, and the data refreshes on Saturday.
This is educational analysis, not investment advice. Figures are early Wednesday, November 4, 2026 readings and will move.
What were the readings before the vote?
| Indicator | Reading | Date | What it measures |
|---|---|---|---|
| S&P 500 against 200-day average | 6.0% above; 1.0% below its record | Oct 28 | Trend and distance from the high |
| VIX | 17.2 | Oct 29 | Expected market volatility |
| High-yield bond spread | 3.26 points | Oct 29 | Extra yield for risky corporate bonds |
| Investment-grade spread | 0.89 points | Oct 29 | Extra yield for safer corporate bonds |
| 10-year minus 2-year Treasury spread | 0.38 points | Oct 30 | Yield curve slope; below zero is an inversion |
| Sahm rule | 0 | Sep | Recession trigger from unemployment |
| Initial jobless claims | 194,000 | Oct 24 | New unemployment filings |
| Market breadth | 59.4% above 200-day average (299 of 503) | Oct 30 | How many stocks support the trend |
Where were valuations and positioning?
| Indicator | Reading | Context |
|---|---|---|
| Shiller CAPE | 40.1 | Long-run median 16.1; record 44.2 in December 1999 |
| Buffett indicator | 209.4% | Total market value against GDP |
| Forward price-to-earnings | 23.7 | Tracked stocks |
| Equity risk premium | Negative 1.11 points | Earnings yield 3.87% against a 4.98% 10-year yield |
| Insider selling against buying | 745 sells, 92 buys, ratio 8.1 | Last 90 days |
| Margin debt | $1.48 trillion, up 31.4% in a year | Record was $1.50 trillion in June |
What do the readings say together?
Stress gauges were calm: spreads tight, claims low and the VIX modest. Valuation and leverage gauges were stretched. That combination means the market had little cushion if news disappointed, yet no sign of financial strain. A crash indicator is not a timing tool, a point made in the method page.
What changes after the rally?
The numbers above will move when the data refreshes: the VIX and spreads usually fall in a rally, and the CAPE rises as prices rise. Compare them with the fade checklist, and read is the stock market in a bubble for the valuation context.
What do the individual gauges mean?
| Gauge | Plain meaning | Reading before the vote |
|---|---|---|
| VIX | How much volatility option traders expect over the next 30 days | 17.2, modest |
| High-yield spread | Extra interest risky companies pay over Treasuries; rises when lenders worry | 3.26 points, low |
| Yield curve | 10-year minus 2-year yield; negative means inverted | 0.38 points, positive |
| Sahm rule | Triggers when unemployment rises about half a point above its low | 0, not triggered |
| Market breadth | Share of stocks above their 200-day average | 59.4% |
| Shiller CAPE | Price divided by 10-year average inflation-adjusted earnings | 40.1, very high |
Read them as a dashboard, not a forecast. When stress gauges are calm and valuation gauges are stretched, the market is vulnerable to bad news but not yet being hurt by it.
How should you use a risk dashboard?
- Check it on a schedule, such as weekly, not after every move.
- Look for changes, not levels: a spread jumping from 3 to 4 points matters more than a spread at 3.
- Combine signals. One gauge is noise; several moving together is information.
- Decide in advance what you will do. A rule written in calm markets beats a reaction in panic.
Our method page explains how each gauge is built and where it has failed.
What would a worse reading have looked like?
The gauges that moved before past market breaks give a sense of the contrast. In a stressed market the high-yield spread is far above its calm level, the VIX is well above 30, breadth has collapsed and the yield curve is inverted. Compare those with the readings before the vote.
| Gauge | Calm, as before the vote | Stressed, as in past breaks |
|---|---|---|
| VIX | 17.2 | 30 or more |
| High-yield spread | 3.26 points | 5 points or more |
| Yield curve (10-year minus 2-year) | 0.38, positive | Negative, or sharply re-steepening |
| Breadth (above 200-day average) | 59.4% | Below 30% |
| Sahm rule | 0 | 0.5 or more |
The stress thresholds are common reference points, not predictions. The point is that none of the stress gauges was near them, even though valuation was very high.
What is the main takeaway?
Calm stress with stretched valuation is a market that can keep rising and can also fall quickly on a shock. Many past peaks looked like this. It is a reason to hold a plan, not to guess a date. For each gauge's definition, see the method page, and for the live values the Crash Indicator. For valuation specifically, the CAPE guide and the Buffett Indicator guide explain readings of 40.1 and about 200%.
What terms should you know?
| Term | Plain meaning |
|---|---|
| VIX | An index of expected 30-day volatility in the S&P 500, built from option prices |
| Credit spread | The extra yield a company pays over a Treasury of the same length |
| Yield curve | The pattern of Treasury yields across different maturities |
| Sahm rule | A recession signal that fires when unemployment rises about 0.5 points above its recent low |
| Breadth | The share of stocks taking part in a rise or fall |
| Buffett indicator | Total stock market value divided by GDP |
| Initial jobless claims | Weekly count of new unemployment benefit filings |
The gauges cover different areas: fear (VIX), credit, the economy, the market's internals and valuation. A reading is more informative when several areas agree.
How can you track these readings yourself?
Each gauge is public and free. The VIX and Treasury yields come from market data sites, credit spreads and jobless claims from the Federal Reserve's FRED database, and the Shiller CAPE from Robert Shiller's published series. This site gathers them in one place, with dates, so you can compare readings over time.
- Check the dashboard weekly rather than daily.
- Write down the readings when you check, so you can see changes.
- Treat a move of two or more gauges in the same direction as the real signal.
- Check the method page when a reading surprises you.
Over a few months you will build a feel for what normal looks like, which is what lets an abnormal reading stand out.
What is the bottom line on the readings?
Before the rally, stress gauges were calm while valuation and leverage gauges were stretched. That combination means a market with little cushion and no visible strain. It is not a timing signal. The useful response is to hold a plan that works if prices rise or fall: spare cash for near-term needs, no unneeded leverage and regular rebalancing. Check the gauges after each weekly update and watch for several moving the wrong way at once.
Frequently asked questions
What was the VIX before the midterms?
17.2 on October 29, a modest reading.
How high is the Shiller CAPE?
40.1 on October 30, against a long-run median of 16.1 and a record of 44.2 in December 1999.
Are credit spreads showing stress?
No. The high-yield spread was 3.26 points on October 29 and the investment-grade spread 0.89 points.
Does the Crash Indicator predict crashes?
No. It tracks risk conditions. High valuation with low stress means a thin cushion, not a timing signal.