The red line is a the ratio of the S&P500 to the VIX volatility index. Basically, the higher the red line is above the yellow band, the more complacent investors are. A decline in the red line means investors are more risk averse, or fearful. What's troubling, is that with the market's most recent new high in September, investors have actually become less complacent (and more fearful or risk-averse). A decline in complacency tends to bring the market down because investors are willing to take less risk. This can be seen on the chart as the red line has shown a lower high, while the market (blue line) made a higher high. In other words -- divergence. With less complacency to fuel the markets higher, it's only a matter of time before it begins to fall, just like in 2007.
