Stock Market October 11, 2000
The equity-only put-call ratios are beginning to reach levels seen at previous major bottoms the last two Octobers, as well as May, 2000. Note that all the major equity-only ratios that we follow are at or near the highest levels registered on their respective charts. This market is extremely oversold, as pessimism has built up to very high levels. Still, we cannot call a "buy" until these ratios roll over and begin to turn down.
Also, our oscillator is painting a very similar picture. It stood at -284 as of Tuesday night. It won't give a buy signal until it can close above -200. So this is a similar picture to what the put-call ratios are presenting. Finally, there is implied volatility. It, too, is painting a very similar picture. Hence, it may come to pass that all three of these equity-only put-call ratios, the oscillator, and implied volatility give buy signals more or less simultaneously in the fairly near future. That would be a powerful combination. However, lest we get ahead of ourselves, remember that bear markets can register very oversold conditions. Thus, aggressive accounts might even want to buy some puts for the short term on the chance that a really nasty selloff might take place. I don't consider that probable, but it's certainly possible.
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