14 replies to this topic

[OEXCHAOS]

Pay a little attention to your sell signals in here. I ignored the sell from this indicator in September, but only because the other sentiment was so Bearish still. Currently, we've got the hedge fund guys leaning pretty hard and that's enough to support some selling, maybe a good deal. Note, I'm not making a case for a huge decline, but we can get a nasty little sell off nonetheless. The set-up is there. Let price and/or breadth be your confirmation.

[eminimee]

where were we in Jan. 04?...could you get a few more months on the front of that?

[qqqqtrdr]

I'm paying close attention to this sell signal, because in the past it has been strong. I only consider it a strong sell above 1.40. If the 10-day goes below 1.40, there must be other technicals that must be shown for a continued drop. I will be interesting to see what todays OEX Put/Call shows. barry

[Gary Smith]

Back in the 80s and at least through the mid-90s, the OEX put/call ratio was one of the better contrarian sentiment indicators. In fact, one year (1988) it was my primary and almost sole intraday trading tool. Bernie Schaefer comes to mind as having interesting studies in the 90s on the use of this indicator as a contrary trading tool. I quit using options data long ago as sentiment indicators but surprised to find Trader Nation now uses the OEX put/call ratio as confirming indicator instead of contrarian indicator. Obviously indicators change over time, but who knows when this one might revert back to once again being an effective contrarian tool again? The last signal in September sure was a contrary one. I guess we will know sooner than later on this current signal. Overall, I would say sentiment is supportive of further upside but would like to see more choppy days like today with a slight downward bias before we move much higher.

[OEXCHAOS]

All charts courtesy of www.decisionpoint.com . We highly recommend Carl's work to any one serious about technical analysis.

[denleo]

I have been watching this indicator with interest. It is clearly giving a sell signal. This is the only one indicator, however, which is bearish in my book. Mark, what are your other indicators saying? Thanks Denleo

[fib_1618]

We talked a bit about this indicator in the chat room yesterday, and came up with the following facts:

Readings above 1.75 have been rare since 1990, and yesterday's 1.92 reading was the highest since Y2K.

Other readings of 1.75 or higher in the last 17 years and their approximate outcomes:

April/May 1999 - Top, 14 day - 40 point OEX decline, and then rally.

Y2K - Top, 60 day - 70 point OEX decline, and then rally.

September 2000 - Top, 30 day - 75 point OEX decline, and then rally.

January 9, 2002 - Top, 30 day - 41 point OEX decline, and then rally.

August 2006 - Top, 3 day - 11 point OEX decline, and then rally.

It's important to note that except for the recent 2006 readings, the NYSE advance/decline line was either declining or in the process of bottoming which is not the case at the current time.

Other than that, as Gary has already pointed out, this was one of the premiere sentiment indicators back in the 1980's with readings above 1.00 giving highly reliable turning points within a couple of days. I do believe it was Steve Todd who originally championed this indicator in his work so it might be interesting to get his take on it.

Fib

[fib_1618]

Checking a bit further, the highest reading on this indicator took place in February 1985 at about the 2.30 level. The period between August of 1984 to December 1985 saw multiple readings above 1.75 which basically capped a rally sequence, but after a short period of days, the OEX continued to rally in spite of (?) these same high readings during this 18 month period. It's also of note that during this same 18 month period, the NYSE advance/decline line was advancing as well. Fib

Edited by fib_1618, 08 February 2007 - 05:18 PM.

[fib_1618]

And in case you were wondering, when the market topped in August of 1987, the 10 day OEX put/call ratio had a .88 reading. During the October "crash", it had a reading of 1.15 at the end of the day, and the highest reading was registered the same day of the December price retest at 1.45. Besides the 1984/1985 and the periods already shared above, there has been no other times in 23 years where this indicator has gone above 1.75...so analyze accordingly. Fib

[arbman]

I looked day after day at the OCC volume ftp who is buying these and it is almost all customer vs market makers, well good majority, there is a little bit of firms. My guess is the customers are buying from the market makers, not the other way --the market maker is not going short the puts basically. So, I posted a few days ago, we will soon see whether these guys are still the smarter ones... So, Fib I wonder whether the composition of the customers vs firms buying mattered in the past, basically there is a chance that perhaps the customers are acting on a myth on this self fullfiling prophecy where no real market decline will come out of it, but given the market sector leadership this afternoon I doubt it. - kisa

Edited by kisacik, 08 February 2007 - 05:38 PM.