Lyons: Indicator ‘Off The Charts’ Bearish

“Since 1998, the put/call ratio on open interest in OEX options has been considered extremely elevated when it has risen above 2.00. From 1998 to 2011, there were just 6 days when the ratio got as high as 2.00. Each of those days either came in the vicinity of a significant market top or at least presented extremely limited upside in the intermediate-term. In the second half of 2014 alone, there were 8 readings. And 2015 has ratcheted up the frequency of such readings to a whole other level. There have now been no less than 34 readings above 2.00, all coming in the past 2 months.

“And it hasn’t just been the frequency of the readings, but the magnitude as well. Before a week ago, the highest level of the OEX open interest put/call ratio since 1998 was 2.31 in November 1999. The past 2 days have seen readings of 2.77 and 2.79! …

“[E]levated readings of the OEX open interest put/call ratio suggest merely short-term negative connotations for the market.

“However, given its more extensive history as a warning sign as well as the current ‘off the charts’ magnitude of the indicator’s readings, we can’t help but wonder if there will eventually be longer-term ramifications as well.”

— Excerpt contributed by Jason Kelly


Z-val: Dana Lyons
Via: Tumblr
Date: 4/22/15
Disposition: Short-Term Bearish
S&P 500 on 4/22/15: 2108
S&P 500 on 7/22/15: 2114
Change: +0.3%
Judgment: Wrong

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