Equity Put/Call Ratio and Flash Crash

Click on Chart to Enlarge

The chart above is really for the Elliott Wave enthusiasts. It is the equity put call ratio with a 5 day average overlaid. Occasionally on the chart you can make out a little 5 wave push in one direction on the 5 day average. At which point the trend reverses and corrects. The current set up has a nice correction after the 5 wave push which retraces just a little over 61.8%. Maybe there will now be another move higher?

Also the 5 day average now sits at 0.52 which is where it bottomed in Oct 2009 and Jan 2010. It also hit that low level in March and April of this year and continued for a bit before correcting. So this dumb money measure is starting to hit extreme levels corresponding with market tops.

Also, I'm sure many of you know the market flash crashed again today after hours. It put the S&P 500 down to about 1065. But then all the trades were canceled. I read a few things on this and some people noted that a similar thing happened soon before the May 6th flash crash. I don't know if this means anything, but it makes you wonder if the machines are about to go for a spin again.

As another side note, AAPL was down 6% after hours on earnings. It has a 20% weighting in the Nasdaq 100, so we should see a decent gap down tomorrow. Personally, with the past stats on market performance after AAPL earnings when overbought, it wouldn't buy the gap down.