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Pastimes : The Naked Truth - Big Kahuna a Myth -- Ignore unavailable to you. Want to Upgrade?

To: Joseph G. who wrote (4297)	8/24/1998 2:48:00 PM
From: Cynic 2005	Read Replies (2) \| Respond to of 86076

To all, This notion that "put-call-ratio is very high and hence the market should go up whenever the ratio is as high as it was last Friday" is perhaps twisted. It is true that the ratio has been a contrary indicator for the short-term. Apparently Bob Brinker is predicting new highs for the market mainly based on this indicator. I also follow this indicator and thought the market will reach new highs in February and it did. But I don't think it is the case this time. Notable difference between now and February: 1) Market (as in S&P 500) is at least 10% higher than it was in February, which rallied in to deteriorating fundamentals. 2) No support from the transports - at least as of now. 3) Excessive shorting at the height of panic is the best indicator of a reversal. I don't think we have seen a real panic (like in October 97) yet - though some contend that there was panic last Friday. I disagree. If anything, that mini-panic might be good for a couple of updays during the week. 4) It is true that a lot of prominent bears have been wrong on the market for a long time. But when they are right it won't be too long for their long blemished record to be right. i.e. it is possible that 5 years of gains will be gone in less than 5 months. Doubt it? see Hong Kong 5) Most important reason of all, if and when there is a BK, the biggest sufferers will be the group that has most to lose from the puts. i.e. it is not the buyers of the puts, but it is the sellers who have the most to lose.