For the short term, today gapped up and price is opening outside the upper bollinger band and at a new 52 week high. I ran a back test of similar conditions and looked at various sized gaps.
The result is that there is about a 4 or 5 to 1 greater MAX loss than MAX gain during the session/today, based upon the back tests. The average intraday decline FROM THE OPEN, has been about 1.0%. And the close has been below the open more often than not, with a open to close loss of ~0.5% in the back tests.
So for the short term, this was/is a sell at the open and cover at the close situation, with a 60-80% chance of a gap fill during the session based on the back tests.
Click on Table to Enlarge
What this shows is a scan of times when the 5 day total put/call average was less than -1 standard deviation below the 20 day average of the total put/call ratio AND prices were at a 52 week high. I also removed clusters so that we were looking at unique instances.
And what we can see is that there was a very skewed downside over the next week. In particular, at the 3 day mark, which would be through Wednesday this week, there was about 7:1 MAX loss versus MAX gain.
So this would suggest that we are likely to see prices reach resistance here and have a modest sell off in the short term of the next week or so.
Each market environment is unique, and with prices turning parabolic to the upside for the last week, it sure doesn't FEEL like the downside risk is notably larger, but the combo of new price high with extreme complacency from the put/call measure has suggested that short term weakness is probable.
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