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Strategies & Market Trends : Stock Attack II - A Complete Analysis
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To: Trumptown who wrote (46731)8/26/2003 1:58:32 AM
From: SpecialK  Read Replies (1) of 52237
 
On Put-call ratio, everyone believes a high put-call ratio is bullish and a low put-call ratio is bearish. The actual numbers used for comparison are above 1.0 and below 0.6.

These can be useful from time to time, but Bobby Beara showed us a chart that was something like this.
stockcharts.com[d,a]dhclnnay[de][pa.60!b30!b200][ile12,26,9][J12417307,Y]&pref=G

There is no way to remove the daily zig-zags, but pay attention to the 30day average compared to the 200 day average. The longer term buying opportunities come when the 30 day averages are far above the 200 day. The longer term selling opportunities come when the 30 day crosses above the 200 day. These moves have been seen as 3 week moves on the short end, and as long as 4-5 months on the longer end.

When I see a topping phase in effect coupled with high put-call ratios. I view it as smart money protecting their long positions, smart money investing in an expectation of a lower market.

When you see high put-call ratios early in an upward movement, I view it as smart money entering naked put positions hoping to earn premium or be put long in positions.

To Sting-Ray's quote of "everyone KNOWS the market is headed down..." This implies that this one day occurrence of high put-call ratio is a herd mentality, when in fact you only need a smaller number of large money traders trading puts vs. a large number (EVERYONE) of small money traders, to create the high put-call ratio.

Ketan
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