Tuesday, June 3, 2008

CBOE Equity Put to Call Ratio Looking Bullish

Based on one of the ways I like to apply the CBOE Equity Put to Call Ratio, this ratio has just turned bullish for the first time since late April. Like any indicator, put to call ratios are far from infallible, but looking at historical context, there is a good possibility that the recent surge in put activity will be enough bricks in the wall of worry to provide a base for another bullish move from current levels.

Given that most of the other indicators I follow have a more neutral outlook, it will be interesting to see how this plays out.

5 comments:

Anonymous said...

bill-maybe i'm just splitting hairs but your green line would make a lot more sense to me at 0.75 based on the data on the screen

Bill Luby said...

You make a good point, anon -- and ultimately it's a personal choice.

If you extend the chart back 3-4 years, you will see that the 0.72 level is not hit very frequently. Keep in mind that the recent market action, with BSC, LEH, etc. has been very unusual.

Personally, I have multiple buy and sell zones and give them different weightings. That being said, I do think 0.72 is valid, but 0.75 picks up some stronger -- though less frequent -- signals.

Cheers,

-Bill

Anonymous said...

That will go down as one of the all time classic bad signals. :)

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