I have tested the P/C ratio on indices against future market activities (I mentioned that two years ago), and found no reliable correlation. The reason is quite simple, the option plays on indices is only one side of a hedging transaction, without ability to easily track the other sides. Mosis on the other hand, at extreme points is always wrong. That is why I use EPC, and only look at extremes (between .45 and .9 it is absolutely useless as a short term indicator). VTO plots the 21 days moving average, so the extreme levels there are narrower maybe .55 to .75, but even in that series, meaningful signals are only at extreme. I also found that the EPC is an early warnng signal (for instance my bear call in early January was "premature" by 45 Naz points, but the EPC peaked very near to that call). Of course, EPC is but one of many indicators as I mentioned many times in the past.
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