CBOE Equity Put to Call Ratio No Longer Bullish

The CBOE equity put to call ratio, which Stockcharts.com and I refer to as CPCE, has been generating consistently bullish readings since the beginning of 2008. Those bullish readings came to an end about a week or so ago, as the chart below reflects. That does not necessarily mean that options sentiment is turning bearish, only that the ‘free lunch’ portion of the bounce off of the March low is over. Now the likelihood of getting whipsawed – either on the long side or the short side – increases considerably. I suspect that a couple more days like yesterday will push options sentiment back into the bullish contrarian camp, but that remains to be seen. Until the market generates a stronger directional signal, priority should be given to conservative strategies.