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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Wayners who wrote (51175)	5/18/2000 5:11:00 PM
From: John Madarasz	Respond to of 99985

For Thursday, May 11, 2000 Stock Market The equity-only put-call ratios are all trending strongly upward. These ratios encompass all equity options and a breakdown consisting of all stocks with 3 characters or less in their symbols ("NYSE") and those with 4 characters or more ("NASD"). All of these ratios are racing upward and are within easy reach of the levels which produced last fall's good buy signals readings in the mid-50's . The S&P 500 futures option put-call ratio is probably the most oversold of all, as it has reached the levels of 1998. However, anticipating the top is probably not a good idea where these ratios are concerned. They must be treated as dynamic indicators rather than static ones. That is, the buy signal will come only when they roll over and begin to trend downward wherever that may occur on the chart rather than at some fixed level. It should also be noted that, during the more severe selloff of August - October, 1998 (associated most prominently with the Long-Term Capital crisis), these ratios topped out at readings in the low- to-mid 60's quite a bit higher than the levels at which last year's excellent buy signals arose. Meanwhile, market breadth has generally been in a better state. Since our oscillator is based on breadth, it has not canceled out the buy signal it gave back on April 18th. Admittedly, much more of a decline would push the oscillator back below minus 200 and that would be enough to cancel out the buy signal. As of Thursday's close (5/11/00), it stood at -53. If the oscillator goes below -200 while the equity-only put-call remains on a sell signal (which is where it currently is), it would be best to stand aside. We'll see whether that situation develops or not, but in the past there have been some nasty declines when that has happened. optionstrategist.com