10 replies to this topic

[tomterrific14]

http://www.indexindi...-params-3y-x-x/ Interpretation.....equity option traders near the most bullish in 3 years..Index option traders the most bullish in 3 years....are both to be rewarded.?

Index option traders tend to be more correct, however, I find it hard to believe that they will get even more bullish than they are now, so any shift toward more put buying by these traders would signal a significant selloff.

This sentiment condition reminds be of the COT data at the bottom on March 9th, only in the reverse, when both large traders and commercials were extremely short, contrary to what one would expect.

[TradeMark]

The way I read this chart is: "Look out below" TM

[tomterrific14]

The way I read this chart is:

"Look out below"

TM

as important is the absolute level of option activity on the call or put side is the CHANGE in direction at those extreme absolute levels...so in coming days, if the there is a shift toward more put buying, "the die is cast" for a downward movement..any continuation of excessive call buying relative to puts would mean the market is on even more "borrowed time" and a sharper correction will ensue, IMHO.

A macd cross on the p/c ratio would signal that shift...as well as a macd cross on the $TICK, which is about to happen...........

[jsavage]

This is too obvious to the point that you may have to discount the level. The ratios could be going through a transitional period of adjusting downward. I remember Marty Zwieg once saying on Wall Street Week long ago that sometimes the retail investors get it right at important market turns.

[IYB]

a man hears what he wants to hear and disregards the rest.....Rogerdodger

Bulls and bears could argue their case equally, using this p/c chart, imho.

The CBOE p/c ratio 10 DMA is at an relative extreme low (high on inverted chart) right now like market tops of Jan 2009, May 2008, Oct 2007, for example and that spells big trouble ahead.

BUT at the same time....OEX Put/Call Ratio 10 DMA is at (coming off of) a relative extreme low (high on inverted chart) like at the 2008 lows of Oct/Nov, 2007 trading low of August, 2006 trading low of June, etc. And conversly, dangerously high markets in the past have been accompanied by high readings on OEX p/c 10 DMA, like the 1.45 reading in late Dec 2008 and May 2008 before that, and the 1.81 reading in Oct 2007-each before a new slide. Why is the OEX not showing put buying on balance now, if this market is as vulnerable as bears claim? OEX says big rally ahead.

So which is it? Perhaps neither, as the CBOE index is influenced more and more by its internal component OEX- so that the components are tending to cancel each other. I made this case the other day and, as expected, got disagreement from bull and bear camps both, as they each argued their own side. But at the moment, the bears seem most dogged in their interpretation, totally ignoring the historical record of the OEX 10 DMA, which is just coming off of a three year low. You can argue that the OEX doesn't work as it did in the past, but the relative highs and lows versus market inflections show differently.

So pick a side and make your case. The numbers don't lie, right? As for me, I think I'll look elsewhere for directional guidance....

Edited by IYB, 21 March 2009 - 04:38 PM.

[tomterrific14]

a man hears what he wants to hear and disregards the rest.....Rogerdodger

Bulls and bears could argue their case equally, using this p/c chart, imho.

The CBOE p/c ratio 10 DMA is at an relative extreme low (high on inverted chart) right now like market tops of Jan 2009, May 2008, Oct 2007, for example and that spells big trouble ahead.

BUT at the same time....OEX Put/Call Ratio 10 DMA is at (coming off of) a relative extreme low (high on inverted chart) like at the 2008 lows of Oct/Nov, 2007 trading low of August, 2006 trading low of June, etc. And conversly, dangerously high markets in the past have been accompanied by high readings on OEX p/c 10 DMA, like the 1.45 reading in late Dec 2008 and May 2008 before that, and the 1.81 reading in Oct 2007-each before a new slide. Why is the OEX not showing put buying on balance now, if this market is as vulnerable as bears claim? OEX says big rally ahead.

So which is it? Perhaps neither, as the CBOE index is influenced more and more by its internal component OEX- so that the components are tending to cancel each other. I made this case the other day and, as expected, got disagreement from bull and bear camps both, as they each argued their own side. But at the moment, the bears seem most dogged in their interpretation, totally ignoring the historical record of the OEX 10 DMA, which is just coming off of a three year low. You can argue that the OEX doesn't work as it did in the past, but the relative highs and lows versus market inflections show differently.

So pick a side and make your case. The numbers don't lie, right? As for me, I think I'll look elsewhere for directional guidance....

I have no firm conviction due to the OEX P/C ratio seeming to contradict an imminent decline that the Equity P/C ratio seems to imply. But since the crowd is overwhelmingly on one side of the market, I thought I'd draw attention to that fact

[IYB]

I have no firm conviction due to the OEX P/C ratio seeming to contradict an imminent decline that the Equity P/C ratio seems to imply. But since the crowd is overwhelmingly on one side of the market, I thought I'd draw attention to that fact

Tom- I interpretted your comments just as you've explained. Wasn't taking aim at you or anyone in particular - just pointing out the contradiction between the CBOE numbers and the OEX only numbers, as I think you were as well. Best regards, D

[spielchekr]

Be careful.

[tomterrific14]

I have no firm conviction due to the OEX P/C ratio seeming to contradict an imminent decline that the Equity P/C ratio seems to imply. But since the crowd is overwhelmingly on one side of the market, I thought I'd draw attention to that fact

Tom- I interpretted your comments just as you've explained. Wasn't taking aim at you or anyone in particular - just pointing out the contradiction between the CBOE numbers and the OEX only numbers, as I think you were as well. Best regards, D

We all here run the risk in our posts to be open to challenge from those with an opposing view, and that is how we learn....I only seek to point out observable technical data and make an interpretation, which can be erroneous...and when it is, I appologize to those who relied on such interpretation when it influenced a wrong decision on their part..if such an interpretation turns out to be correct and is relied upon, I am thankful to provide that insight.

One further observation in the INDEX P/C rations, both dollar volume and quantity that spiel posted...there was record put volume on Friday...and this buttresses my view that a *shift" to put buying by these more astute traders could signal a significant pullback.....perhaps only a mild one to 738-750....for my money, I'm not interested in playing the bear side as SS sell signals haven't been given and by my thinking that this uptrend hasn't gotten overbought enough (as measured by the % of stocks ablove their 50 day MA's.) I'm looking to time an entry on the long side.

[IYB]

Thanks Spiel. That got my