$VIX and $CPC
Did you see that over the last 4 days the equity put/call ratio has been over 1.0 and the total put call was 1.36 on 9-18, setting an all time high?
This is indeed very unusual. However, the absolute closing value of $CPC is only a short-term trading indicator. At best, such high values indicate that a technical bounce is likely within the next 1-3 trading days. I am more interested in intermediate-term trading signals myself. The 21-dma of $CPC is an indicator which can give such signals. Note that despite the huge 2-day rally, it hasn't issued a Buy signal yet - i.e., it hasn't made a top.
Along with a VIX being moderately high(in the 40s)doesn't this indicate a short term bottom soon?
The absolute $VIX levels are not so important as its formation. Yes, $VIX above 40 indicates a fair amount of fear among the traders. But we don't get a Buy signal until the $VIX spikes at such a high level - i.e., has a sharp advance, followed by a sharp decline.
At least that's the theory. The current action has me somewhat baffled. The $VIX advanced steadily and although it made a top during the past two days, it doesn't quite have what I'd call a spike. Most of my other indicators came very close to indicating an intermediate-term bottom - but did not quite reach that level.
So, I'm not sure what to think. This certainly isn't the end of the bear market. But was it a major low? Is it going to be a two-day wonder - or is it going to morph into a multi-week rally? I don't know. But if this was a bottom, it's certainly weaker than the bottom established in July - and, IMO, is likely to hold for a shorter time.
Regards,
Vesselin
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