Stock market sentiment turned bearish about a year ago and despite the extended rally in the market
since Feb. of this year, finally began to turn more bullish as we entered Jul. of this year. The equities
put / call ratio shows players are bearish when the 30 day m/a is above .70 and that they are too
bullish when the put / call falls to around the .55 level $CPCE
From a contrarian perspective, investors and traders should be thinking about the long side of the
market when the p/c is at .70 or above and be looking to lighten positions when conditions are
frothy at .55. I use a crossover of .625 to demarcate the bull / bear sentiment line. So, sentiment is
currently edging toward bullish for the first time since mid - 2015, although it is well above the
.55 line, when everything is deemed to be coming up roses. From a contrarian perspective, the
market is edging toward an intermediate term overbought.
Net selling pressure in stocks hit an important interim peak in the late summer / autumn period
last year when the market began a period of intermittent sell downs that lasted through mid - Feb.
of 2016. The selling pressure for NYSE stocks has abated steadily since then, and as measured
by the 30 day m/a of this gauge is now entering overbought territory for the first time since Apr.
of last year. Net buying pressure holds forth presently and it can certainly persist and strengthen
from here. But note that on a 30 day m/a basis it has not done much better than currently over
the past five years. $TRIN
Note as well, the 30 day TRIN chart indicates a deep oversold when selling pressure rises to
1.50 on this indicator.
- Peter Richardson
- Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!