PVZ:
This is what I think makes this a valuable thread, at least for me. Let me noodle this through with you. The put/call ratio, when high, signals worry and stress and generally points towards a bottoming in stocks (as a contrarian indicator). So a p/c of .25 is farther from a bottom than a p/c of .45.
Vix, similarly, the higher it is the closer to a bottom ("vix is high, ya gotta buy, vix is low, ya gotta go"), so a Vix of 25 is farther from a bottom than a Vix of 45, to overstate the case.
But the ratio of these two things is really tracking two similar contrarian indicators, right? 0.25: 25 is the same as 0.45: 45, so the chart will all depend on the scale at which the two numbers are compared.
Right now p/c is 0.789 and the Vix is 40.89, which gives you a ratio of 0.019, which is extremely low by any measure. Last October when it was very bad it bottomed at what looks like about 0.013:
stockcharts.com[e,a]dhllnyay[d20010804,20011031][pb15!b100][vc60]&pref=G
In any event, I know that the absolute numbers here are less important than the slope of the trend and the moving averages.
For example, if you take a p/c of 0.28 (low) and a VIX of 20 (also low), you get a ratio of 0.014.
Again, I'm trying to figure out what this ratio might mean, but it seems to serve up low numbers when the markets might be topping (low p/c and low Vix) and low numbers when the markets might be capitulating (high p/c and high Vix).
I must be missing something here, can you help?
TIA,
Kb |
