I suspect put/call ratios are not as useful as sentiment indicators,
but I've been watching equity options anyway, since I understand (am I
right?) these are typically traded by individual speculators and might
therefore be an indicator of sentiment, unlike index options which are
used by institutions in hedging their portfolios.
The equity put/call volume ratio has been in the range 0.32 - 0.37 all
through July, and hit a low of 0.32 yesterday. By comparison at the
end of January, at the top of the small cap market before the last
correction, this ratio was 0.35 - 0.39. In other words, buyers of
equity options seem to be even more bullish now than they were in late
January. For comparison around April 11, at the market bottom, this
ratio fell in the range 0.5 - 0.72.
In other news, todays AAII survey came back up a bit:
6/23 59% bulls, 15% bears
6/30 52 25
7/4 45 30
7/11 49 18
So we've been below the 55% bullish level for a little while now, and
the market hasn't corrected. So far things are looking different from
the three previous cases wehre the 2-week bull % exceeded 55%. In
those instances, the market did not go up, it crashed in 1987, held
flat in 1992, and corrected severely for small caps in 1996. In all
three cases the % bulls went down after it exceeded 55%. This time
around, the % bulls went down, but the market went up. |
