Buy signals from the equity-only put-call ratio remain in effect. Also, there has been a buy
signal from the S&P 500 futures option put-call ratio. These occurred nearly two weeks ago,
but the market has not responded well to them yet.
However, not all is "perfect" (it never is). For example, even though the market particularly the
NASD stocks sold off rather heavily in the most recent one-week trading period, put buying
did not increase to "panic" levels as it did a few weeks ago. Moreover, implied volatilities
(neither $VIX nor QQQ), which spiked to high peaks a couple times previously, also failed to
rise much in this most recent bearish move. Hence, the public is not in as much of a panic as
we'd like to see. But the fact that they were in a "panic" previously, may be good enough we'll
just have to see.
We do have two "stop out" points, though. One is our oscillator, which is still on the buy
signal that it generated in April, just after the mini- crash on April 14th. If it closes below
minus 200, then the buy signal will be aborted. It closed at -196 Thursday night. Bullish
positions should be lightened up at that point. Even if that happens, the oscillator will
eventually give another buy signal down the road. The second stop exists on the equity-only
put-call ratio itself. Also, the equity-only put-call ratios have begun to edge upward again. If
that small upward move develops into a true local minimum, then a sell signal (or at least a
"buy cancel") would be in effect. So, we'll stay bullish unless one or both of these "stop out"
conditions is met.
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