Jim, I have not found a good way yet to interpret the DJX P/C ratio, I see no specific pattern over the last five months that can be used, and i do not have long term historical data. I agree with you that the lopsided P/C ratio just prior to the recent blow up is strange, but those guys are not winners on these puts, either the "powers" misread the coming attraction, or, they were buying heavily the dow, and hedging these long positions with hedges on the DJX. If that is correct, than lopsided P/C ratio on DJX may be one of the preconditions to DJI blow outs. Right now, that ratio has subsided to well under 2 (from 5 just prior to the blow out), is that a minimum indicating a turn? I am not sure, because, if January is a precedent, it is not a good one, the ratio were under 2 both on Jan 2 (a bottom) and Jan 31 a top. Some indicators may be worthwhile to watch, but may not have good predictive powers. I like much more the equities only P/C ratio, it was close to 1 on Jan 2 and close to .5 at tops (but right now, it is again very close to .5, indicating possible over exuberance). Unfortunately, I do not know of a single indicator that by itself has sufficient "predictive powers" to be used exclusively.
Zeev |
