Drop in Equity Put/Call Ratio Points to Higher Prices Post-Holiday

As noted in today’s twitter updates (follow @MarketTells) the CBOE equity put/call ratio closed well below Tuesday’s level, triggering a short-term buy setup. The last thirty separate instances in which the equity put/call ratio initially declined from the previous session three consecutive days are listed below. Note that in 25 cases, or 83% of the time the S&P was higher three sessions later, significantly above the 54% random chance of a higher S&P three sessions later in the same time frame…

CBOE Equity Put/Call Ratio Declines Three Days
02/10/10… S&P500 ??? three sessions later
01/08/10… S&P500 +0.1% three sessions later
11/04/09… S&P500 +4.5% three sessions later
08/20/09… S&P500 +2.1% three sessions later
08/05/09… S&P500 +0.4% three sessions later
07/13/09… S&P500 +4.4% three sessions later
04/13/09… S&P500 +0.8% three sessions later
03/10/09… S&P500 +5.1% three sessions later
01/23/09… S&P500 +5.1% three sessions later
12/23/08… S&P500 +0.7% three sessions later
12/17/08… S&P500 -3.6% three sessions later
10/29/08… S&P500 +3.9% three sessions later
08/22/08… S&P500 -0.8% three sessions later
07/18/08… S&P500 +1.7% three sessions later
04/02/08… S&P500 +0.4% three sessions later
03/13/08… S&P500 +1.2% three sessions later
12/28/07… S&P500 -2.1% three sessions later
09/21/07… S&P500 -0.0% three sessions later
08/31/07… S&P500 +0.3% three sessions later
08/17/07… S&P500 +1.3% three sessions later
07/09/07… S&P500 +1.0% three sessions later
06/28/07… S&P500 +1.3% three sessions later
06/14/07… S&P500 +0.7% three sessions later
04/02/07… S&P500 +1.4% three sessions later
02/15/07… S&P500 +0.1% three sessions later
01/11/07… S&P500 +0.5% three sessions later
11/15/06… S&P500 +0.3% three sessions later
10/23/06… S&P500 +0.9% three sessions later
10/12/06… S&P500 +0.1% three sessions later
04/19/06… S&P500 -0.1% three sessions later
02/09/06… S&P500 +0.9% three sessions later

I would still expect Tuesday’s high at SPH 1077 to remain potential resistance Thursday given the high TICK reading associated with that level, but beyond that it appears short-term weakness should be treated as a buying opportunity heading into next Tuesday’s close (markets are closed Monday for the Presidents Day holiday).

While I don’t give this a lot of weight, it’s interesting that the session before Presidents Day (this Friday) has been a consistently weak session in recent years. Since 1990, the S&P has gained more than 0.5% on the day before Presidents Day only twice out of twenty occurrences, and closed lower 21 out of the last 30 years (70%). That’s a significant edge over random, noteworthy considering the generally positive implications for stocks prior to most holidays…

The Session before Presidents Day
02/12/10 S&P500 ???
02/13/09 S&P500 -1.0%
02/15/08 S&P500 +0.1%
02/16/07 S&P500 -0.1%
02/17/06 S&P500 -0.2%
02/18/05 S&P500 +0.1%
02/13/04 S&P500 -0.5%
02/14/03 S&P500 +2.1% (*)
02/15/02 S&P500 -1.1%
02/16/01 S&P500 -1.9%
02/18/00 S&P500 -3.0%
02/12/99 S&P500 -1.9%
02/13/98 S&P500 -0.4%
02/14/97 S&P500 -0.4%
02/16/96 S&P500 -0.5%
02/17/95 S&P500 -0.7%
02/18/94 S&P500 -0.6%
02/12/93 S&P500 -0.7%
02/14/92 S&P500 -0.3%
02/15/91 S&P500 +1.3% (*)
02/16/90 S&P500 -0.7%
02/17/89 S&P500 +0.7% (*)
02/12/88 S&P500 +0.7% (*)
02/13/87 S&P500 +1.5% (*)
02/14/86 S&P500 +1.1% (*)
02/15/85 S&P500 -0.4%
02/17/84 S&P500 -0.3%
02/18/83 S&P500 +0.4%
02/12/82 S&P500 -0.0%
02/13/81 S&P500 -0.4%
02/15/80 S&P500 -1.1%

Categories : Archived EOD Commentary, End-of-Day Commentary

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