Sunday, June 1, 2014

Equity Put/Call Ratio Sell Warning

equity put/call ratio
Click on Chart to Enlarge

This chart shows that the 5 day average of the equity put/call ratio is outside its 1 month, 1 standard deviation band.  I frequently use this signal on a total put/call data chart as a timing indicator to identify when legs up in stocks are about to end.

Based on a typical signal like this I would take some of the following courses of action:

  1. Move stop losses under minor support on long positions so that you can stay with an uptrend but get taken out on any technical break
  2. Exit part of long positions at the current levels, and maintain another portion with a trailing stop or stop movement strategy
  3. Exit long call options on index calls or any near term equity call options
  4. Build and narrow down a list of potential short candidates based upon your trading time frame.  Identify precisely what signals are needed to establish short positions, and exactly the appropriate amount of risk for your trading style and plan.

Again, as I suggested in my last post and on the notes on the chart above.  I would expect that the market has some further upside in it, but seeing as the Nasdaq is at a breakout point, and the Russell 2000 is well below resistance, I am not convinced that we will see successful breakouts on all the indexes prior to the next 1+ month duration correction in the stock indexes.

So after a good call in my recent post suggesting that QQQ would likely rise until further notice, consider this further notice that the easy money may be already made on this move.

1 comment:

  1. There is an exciting new opportunity that is growing in popularity online.

    Major companies are paying people for giving their opinions!

    You can earn anywhere up to $5 - $75 per each survey!

    This is available to anybody in the world!