ajtj99's Market Pulse

[Justa Werkenstiff]

Market: A few days ago I said:" Let me note that the OPEX P/C is not at all bullish; in fact, it is bearish as a non-contrarian indicator on the 10 dma and the 21 dma. Nobody seems to mention this fact."

Finally, a service I use has noticed this issue. One should note that the OEX P/C is fast approaching the top of January (1.4) of this year. It is currently at 1.35:

"Since 1997, high readings in the OEX put/call ratio have generally coincided with future market weakness, while low readings have often preceded the opposite. For example, 20 days after the 21-day average peaked at a level of 1.4 or above, the S&P 500 was higher only 27% of the time (3 out of 11 occurrences), with an average return of -1.8%. 120 days later, the S&P was higher 4 out of 10 times, and the average return was -1.4%. Contrast that to times when the ratio was forming a low under 1.0. 20 days after those occurrences, the S&P was higher 89% of the time (8 out of 9), and the average return was a very respectable 5.8%. 120 days later, it was higher 78% of the time, and the average return was 8.0%. Clearly, there is a wide chasm in future S&P performance between those times when the OEX put/call ratio was low (bullish for the market) and when it was high (bearish for the market).

The current level of the 21-day average is not quite as high as it was earlier this year, or as high as some of the previous peaks over the past few years. However, it is rising quickly and it should be monitored."

With respect to the last sentence, the trend is up on the 21 dma and strongly so.