The equity-only put-call ratio never got to the lofty levels usually associated with panic bottoms. Part of the reason for that is that the NASDAQ stocks were so strong, even while the S&P and Dow were falling, that they engendered enough call buying to keep the equity-only put-call ratio at modest levels. Then a buy signal was generated earlier this week, albeit not a buy signal from extreme levels, where we'd prefer to see it. Meanwhile, our oscillator has been bouncing around at oversold levels, neglecting to give a buy signal. It has fallen as low as 446 back on February 25th, rose to 202 and then fell to 346 when the Dow took its big hit of nearly 400 points on March 7th. A buy signal will occur when the oscillator closes above 180 on any day. In addition, the movements just described form a bullish divergence that often precedes a good buy signal: the Dow made a lower low (March 7th vs. February 25th), but the oscillator did not. That is called a "W" bottom because the oscillator probed the lows twice, and when this divergence exists, it is an extra "positive". Overall, we will wait until both of the indicators turn bullish. When they do, we will recommend a bullish position in $OEX calls. Right now as of Thursday night the oscillator stands at 248. It wouldn't take a whole lot to push it to a buy signal. When the buy signal is confirmed, we will post it on the HOTLINE that night, along with our recommended strategy.
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