Chart of the Day – Put / Call Ratio Hits Lows of Year

by Enis November 27, 2012 3:12 pm • Commentary

I just noticed this today, but the CBOE put / call ratio that I follow on Bloomberg hit its lowest level in 2012 yesterday, as many more calls traded relative to puts:



It closed below the 0.68 level for the first time since Jul 2011.  The market’s previous lows this year in Jan, March, Apr, and Sept were followed by selloffs in 3 of the 4 instances (market kept rallying after Jan).  The current setup adds one more piece of evidence that sentiment has become too optimistic as a result of last week’s rapid rally, despite the numerous headwinds markets face in 2013.

I’ve mentioned the above put/call ratio chart before, with the caveat that it’s only one of many indicators that I follow, and should by no means be the sole basis for decision-making.  But I thought it was worth highlighting since it hit an extreme level yesterday.  I continue to think the next 50 points in the SPX index is more likely to be lower than higher.