VIEWPOINTS OF A COMMODITY TRADER

 

I thought I would take a moment and point out a few things concerning the current sentiment readings in the stock market. Traditionally these indicators, like most have limited predictive qualities except for when they reach extreme conditions. They tend to be more reliable when in extreme territory, especially if there are other conditions (see related post) supporting the argument such as volume, new highs or new lows and of course some price deterioration.

Here are some current readings:

1-On Wednesday the CBOE Put-call ratio sank to the lowest level of the past TEN YEARS with a reading of .32 and has been running consistently low for the last 6 sessions with an average reading of .42

2- The ISE sentiment index is a slightly different way of looking at option sentiment since it is primarily focused on smaller option traders and it looks at option activity to open a trade. So by looking at the ratio of the ISE equity only call put ratio we get a much better idea of what retail option traders are doing. 

 

Yesterday they were the most bullish they’ve ever been. According to the intra-day activity, they started this morning with a call buying frenzy that took the ratio to 722 calls for every 100 puts. As the day wore on they calmed down a bit but were still buying more than 400 calls for every put. Then finally when the dust was settled, the daily call put ratio for the day stood at 348 – the highest daily close ever since we have data for this metric. That pushed the 10 day moving average to its highest ever as well: 249.

 

3-The VIX Index of NYSE Volatility hit a low at 15.23 on Monday and 15.55 on Wednesday, THE LOWEST LEVEL SINCE July of 2007.

 

4-The Bullish Consensus readings were grossly overbought at 75% bulls and the Investors Intelligence Bearish percentage is confirming this at a reading of 18.9% Bears.

 

Filed under: Food For Thought by Charles Maley