Monday, February 2, 2015

SPY at Support and Put/Call Ratio Elevated

Click on Chart to Enlarge

The chart above is the total put/call ratio with a moving average and some standard deviation bands.

I am showing this because based upon the recent history of the moving average, it is in the upper end of its range and is near the upper deviation band.  So there is the distinct possibility that the current price level or slightly lower will be a bottom region for stock prices.  However, note instances like early Oct 2014 when the ratio moved up and then came back inside the bands, only to be followed with a break to new low in prices which led to a significant price decline.

That scenario needs to be accounted for in the current environment as price has mostly traded in a range for the last two months.  So while price is at the lower end of the range ( and the put/call ratio is near the upper end of the range), price is not necessarily extended to the downside, and so a significant price break lower could occur.

Click on Chart to Enlarge

Here is SPY with bollinger bands.  The bands have not been narrow for the last 6 weeks, and 3 times since early January the SPY price has touched the lower band and reversed higher, including (so far) today.  My feeling here is that if today's low is revisited then it will probably occur with some significant short-term downside and multiple closes below recent support at 198ish.

For the bullish case, at this morning's lows in the indexes, there was a significant hourly time frame bullish divergence on the MACD followed by swift rebounds.  A move above 202.30 would be a short term chart sign of strength as it would break an hourly chart swing high/resistance.

For index trader's here if long an ETF, I think this morning's low could be used as a stop point.


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