CBOE Equity Put/Call Ratio Under .60 Third Time in Five Days
By
Rennie on Tuesday, July 20th, 2010 at 12:43 am
The CBOE equity put/call ratio is on the verge of triggering an intermediate-term sell. It closed at .52 Monday, sending the 10-day moving average down to .60. Note from the longer-term chart that the 10-day average of the put/call ratio consistently oscillates in the .60 – .80 range. When it breaks the lower end of that range, it signals unusually heavy call volume relative to put volume. That’s a bearish sign for stocks as long as the average remains under .60. Sometimes this signal can be early, but it’s not usually wrong in signaling lower prices ahead or limited upside potential. In the table below is every instance since 2003 in which the 10-day average of the equity put/call ratio closed below .60, followed by the date when the average rose back over .605 and the performance of the S&P500 in this time frame…
CBOE Equity Put/Call Ratio 10day Avg & the .60 Level
06/07/10 Under 1050.47… 06/08/10 Over 1062.00… S&P +1.1%
03/10/10 Under 1145.61… 05/07/10 Over 1110.88… S&P -3.0%
01/04/10 Under 1132.99… 01/25/10 Over 1096.78… S&P -3.2%
11/16/09 Under 1109.30… 11/20/09 Over 1091.38… S&P -1.6%
10/14/09 Under 1092.02… 10/29/09 Over 1066.11… S&P -2.4%
09/16/09 Under 1068.76… 09/30/09 Over 1057.08… S&P -1.1%
08/07/09 Under 1010.48… 08/19/09 Over 996.46… S&P -1.4%
08/20/09 Under 1007.37… 09/04/09 Over 1016.40… S&P +0.9%
10/09/07 Under 1565.15… 10/19/07 Over 1500.63… S&P -4.1%
07/10/07 Under 1510.12… 07/25/07 Over 1518.09… S&P +0.5%
05/08/07 Under 1507.72… 06/11/07 Over 1509.12…S&P +0.1%
04/26/07 Under 1494.25… 05/01/07 Over 1486.30…S&P -0.5%
01/12/07 Under 1430.73… 01/29/07 Over 1420.62…S&P -0.7%
12/14/06 Under 1425.49… 01/09/07 Over 1412.11…S&P -0.9%
12/11/06 Under 1413.04… 12/13/06 Over 1413.21…S&P +0.0%
11/17/06 Under 1401.20… 12/05/06 Over 1414.76…S&P +1.0%
10/23/06 Under 1377.02… 10/27/06 Over 1377.34…S&P +0.0%
05/10/06 Under 1322.85… 05/12/06 Over 1291.24…S&P -2.4%
05/05/06 Under 1325.76… 05/09/06 Over 1325.14…S&P -0.1%
04/04/06 Under 1305.93… 05/03/06 Over 1307.85…S&P +0.2%
02/21/06 Under 1283.03… 03/07/06 Over 1275.88…S&P -0.6%
01/05/06 Under 1273.48… 02/07/06 Over 1254.78…S&P -1.5%
11/21/05 Under 1254.85… 12/30/05 Over 1248.29…S&P -0.5%
11/03/05 Under 1219.94… 11/17/05 Over 1242.80…S&P +1.9%
09/28/05 Under 1216.89… 10/10/05 Over 1187.33…S&P -2.4%
09/19/05 Under 1231.02… 09/21/05 Over 1210.20…S&P -1.7%
09/12/05 Under 1240.56… 09/15/05 Over 1227.73…S&P -1.0%
08/23/05 Under 1217.59… 08/24/05 Over 1209.59…S&P -0.7%
05/23/05 Under 1193.86… 08/04/05 Over 1235.86…S&P +3.5%
02/28/05 Under 1203.60… 03/02/05 Over 1210.08…S&P +0.5%
02/02/05 Under 1193.19… 02/18/05 Over 1201.59…S&P +0.7%
12/14/04 Under 1203.38… 01/07/05 Over 1186.19…S&P -1.4%
11/08/04 Under 1164.89… 12/09/04 Over 1189.24…S&P +2.1%
07/30/04 Under 1101.72… 08/02/04 Over 1106.62…S&P +0.4%
06/28/04 Under 1133.52… 06/30/04 Over 1140.75…S&P +0.6%
04/27/04 Under 1138.15… 04/29/04 Over 1113.88…S&P -2.1%
04/15/04 Under 1128.84… 04/16/04 Over 1134.57…S&P +0.5%
04/07/04 Under 1140.51… 04/13/04 Over 1129.42…S&P -1.0%
03/02/04 Under 1149.10… 03/09/04 Over 1140.57…S&P -0.7%
02/12/04 Under 1152.11… 02/27/04 Over 1144.94…S&P -0.6%
12/16/03 Under 1075.13… 02/02/04 Over 1135.26…S&P +5.6%
11/28/03 Under 1058.20… 12/10/03 Over 1059.05…S&P +0.1%
10/14/03 Under 1049.48… 10/28/03 Over 1046.79…S&P -0.3%
09/17/03 Under 1025.97… 09/22/03 Over 1022.79…S&P -0.3%
08/19/03 Under 1002.33… 08/27/03 Over 996.79…S&P -0.6%
06/17/03 Under 1011.68… 06/30/03 Over 974.50…S&P -3.7%
06/05/03 Under 990.14… 06/10/03 Over 984.84…S&P -0.5%
03/21/03 Under 895.89… 03/25/03 Over 874.74…S&P -2.4%
01/14/03 Under 931.66… 01/15/03 Over 918.22…S&P -1.4%
01/06/03 Under 929.01… 01/08/03 Over 909.93…S&P -2.1%
Out of 50 occurrences, 32 led to a lower S&P by the time the moving average rose back over .605 for a solid 64% accuracy. In the same period of time, the random chance for a lower S&P ten trading days later (the average length of the signal) is only 42%, indicating heightened equity call volume presents a significant downside edge over the intermediate-term. Only 5 cases out of 48 led to an S&P up over 1% by the time the signal was closed out, while 17 led to an S&P down over 1%. Note that this signal was not technically triggered Monday as the 10-day average closed right on the .60 mark. To send it under, we’ll need to see a closing ratio below .64 on Tuesday.
CBOE Equity Put/Call Ratio Under .60 Third Time in Five Days
By Rennie on Tuesday, July 20th, 2010 at 12:43 amThe CBOE equity put/call ratio is on the verge of triggering an intermediate-term sell. It closed at .52 Monday, sending the 10-day moving average down to .60. Note from the longer-term chart that the 10-day average of the put/call ratio consistently oscillates in the .60 – .80 range. When it breaks the lower end of that range, it signals unusually heavy call volume relative to put volume. That’s a bearish sign for stocks as long as the average remains under .60. Sometimes this signal can be early, but it’s not usually wrong in signaling lower prices ahead or limited upside potential. In the table below is every instance since 2003 in which the 10-day average of the equity put/call ratio closed below .60, followed by the date when the average rose back over .605 and the performance of the S&P500 in this time frame…
CBOE Equity Put/Call Ratio 10day Avg & the .60 Level
06/07/10 Under 1050.47… 06/08/10 Over 1062.00… S&P +1.1%
03/10/10 Under 1145.61… 05/07/10 Over 1110.88… S&P -3.0%
01/04/10 Under 1132.99… 01/25/10 Over 1096.78… S&P -3.2%
11/16/09 Under 1109.30… 11/20/09 Over 1091.38… S&P -1.6%
10/14/09 Under 1092.02… 10/29/09 Over 1066.11… S&P -2.4%
09/16/09 Under 1068.76… 09/30/09 Over 1057.08… S&P -1.1%
08/07/09 Under 1010.48… 08/19/09 Over 996.46… S&P -1.4%
08/20/09 Under 1007.37… 09/04/09 Over 1016.40… S&P +0.9%
10/09/07 Under 1565.15… 10/19/07 Over 1500.63… S&P -4.1%
07/10/07 Under 1510.12… 07/25/07 Over 1518.09… S&P +0.5%
05/08/07 Under 1507.72… 06/11/07 Over 1509.12…S&P +0.1%
04/26/07 Under 1494.25… 05/01/07 Over 1486.30…S&P -0.5%
01/12/07 Under 1430.73… 01/29/07 Over 1420.62…S&P -0.7%
12/14/06 Under 1425.49… 01/09/07 Over 1412.11…S&P -0.9%
12/11/06 Under 1413.04… 12/13/06 Over 1413.21…S&P +0.0%
11/17/06 Under 1401.20… 12/05/06 Over 1414.76…S&P +1.0%
10/23/06 Under 1377.02… 10/27/06 Over 1377.34…S&P +0.0%
05/10/06 Under 1322.85… 05/12/06 Over 1291.24…S&P -2.4%
05/05/06 Under 1325.76… 05/09/06 Over 1325.14…S&P -0.1%
04/04/06 Under 1305.93… 05/03/06 Over 1307.85…S&P +0.2%
02/21/06 Under 1283.03… 03/07/06 Over 1275.88…S&P -0.6%
01/05/06 Under 1273.48… 02/07/06 Over 1254.78…S&P -1.5%
11/21/05 Under 1254.85… 12/30/05 Over 1248.29…S&P -0.5%
11/03/05 Under 1219.94… 11/17/05 Over 1242.80…S&P +1.9%
09/28/05 Under 1216.89… 10/10/05 Over 1187.33…S&P -2.4%
09/19/05 Under 1231.02… 09/21/05 Over 1210.20…S&P -1.7%
09/12/05 Under 1240.56… 09/15/05 Over 1227.73…S&P -1.0%
08/23/05 Under 1217.59… 08/24/05 Over 1209.59…S&P -0.7%
05/23/05 Under 1193.86… 08/04/05 Over 1235.86…S&P +3.5%
02/28/05 Under 1203.60… 03/02/05 Over 1210.08…S&P +0.5%
02/02/05 Under 1193.19… 02/18/05 Over 1201.59…S&P +0.7%
12/14/04 Under 1203.38… 01/07/05 Over 1186.19…S&P -1.4%
11/08/04 Under 1164.89… 12/09/04 Over 1189.24…S&P +2.1%
07/30/04 Under 1101.72… 08/02/04 Over 1106.62…S&P +0.4%
06/28/04 Under 1133.52… 06/30/04 Over 1140.75…S&P +0.6%
04/27/04 Under 1138.15… 04/29/04 Over 1113.88…S&P -2.1%
04/15/04 Under 1128.84… 04/16/04 Over 1134.57…S&P +0.5%
04/07/04 Under 1140.51… 04/13/04 Over 1129.42…S&P -1.0%
03/02/04 Under 1149.10… 03/09/04 Over 1140.57…S&P -0.7%
02/12/04 Under 1152.11… 02/27/04 Over 1144.94…S&P -0.6%
12/16/03 Under 1075.13… 02/02/04 Over 1135.26…S&P +5.6%
11/28/03 Under 1058.20… 12/10/03 Over 1059.05…S&P +0.1%
10/14/03 Under 1049.48… 10/28/03 Over 1046.79…S&P -0.3%
09/17/03 Under 1025.97… 09/22/03 Over 1022.79…S&P -0.3%
08/19/03 Under 1002.33… 08/27/03 Over 996.79…S&P -0.6%
06/17/03 Under 1011.68… 06/30/03 Over 974.50…S&P -3.7%
06/05/03 Under 990.14… 06/10/03 Over 984.84…S&P -0.5%
03/21/03 Under 895.89… 03/25/03 Over 874.74…S&P -2.4%
01/14/03 Under 931.66… 01/15/03 Over 918.22…S&P -1.4%
01/06/03 Under 929.01… 01/08/03 Over 909.93…S&P -2.1%
Out of 50 occurrences, 32 led to a lower S&P by the time the moving average rose back over .605 for a solid 64% accuracy. In the same period of time, the random chance for a lower S&P ten trading days later (the average length of the signal) is only 42%, indicating heightened equity call volume presents a significant downside edge over the intermediate-term. Only 5 cases out of 48 led to an S&P up over 1% by the time the signal was closed out, while 17 led to an S&P down over 1%. Note that this signal was not technically triggered Monday as the 10-day average closed right on the .60 mark. To send it under, we’ll need to see a closing ratio below .64 on Tuesday.