Zack, you are right, DJX P/C is a poor indicator, at least simple high put values are not sufficient, possibly extreme values such as more than 5 to 1 (like last Friday) might be indicative, but that will require plotting these data. I think that a better indicator is the P/C ratio of equities alone, but even that indicator get "skewed" It was not very good on March 22 nd, but was pretty good on January 2nd (indicating a local bottom) and January 31st indicating a local top. The VXN could also be considered (it registered its low for the year at 60 on January 31st a major turning point.). VXN at 65 (down from 84 in just a week or so) and droping rapidly might be a warning signal. Unfortunately, the VIX and VXN's absolute values are not very good indicators, but their trends and change in trend are. So once the VXN changes direction (wherever it bottoms), then we should worry about a decline. Right now, however, there are many other indicators that are still quite bullish, but these are very short term one and can turn on a dime (they almost did today, but the afternoon bounce negated earlier readings).
Zeev
Zeev |
