Total Put/Call Ratio Analysis and What it Means For Stocks

Click on Chart to Enlarge

This chart above show the raw daily total put/call volume ratio with some moving averages and an oscillator type set-up in the bottom pane.  What is easily recognizable is that the oscillator levels have poked up to extreme levels relative to the trend for the last few years.  This indicates that we should expect a bottom in prices to be placed here if the trend is to continue in similar fashion.  Now referencing the chart of the S&P 500 below, look at each time the put/call oscillator rose above the green line and compare those times to the price action of the S&P.

Click on Chart to Enlarge

We can see that repeatedly when we have seen the fear -as evidenced by increased relative put volume- move to similar levels as we did last week, prices have stabilized and moved higher.  Now it appears that the put/call volume oscillator has time and room to fall again before an potential complacent sentiment is obviously developing.  I would suggest that we expect to see yet higher highs in stock indexes from this point.  An obvious stop loss point could be below last week's low.

Now in addition to the sentiment analysis, any analysis or expectation of price action should be based on past history of price and time data.  And going back to the Oct 2011 low, the largest rallies within corrective phases of price action have been ~3%, 4%, 4%, and 5% lasting from ~5 trading days to ~15 trading days.  So with each day that passes, and an already nearly 5% thrust in 5 days off last week's low, it seems to be reasonable to believe that a corrective low has occurred already and a new uptrend or range will develop.  In other words it would be out of character for the established trend to move any higher and then fail to make new bull market highs before falling below last week's low.

A New Stock Market Update Video Is Available

I recorded a new video today for members of the Trader's Crystal Ball email list covering the current position of the US stock market.  You will need to have a login email and password to view the video.  Use this link to create a login if you have not already done so.

CLICK HERE to Watch the video

The video highlights the current US stock market position in context of the principles of The Traders Crystal Ball eCourse. In this video I review the put/call ratio analysis as taught in the eCourse as well as recent signs of volatility imbalance in the options market and what that typically means.  Additionally I give you a special look at proprietary analysis suggesting that 2/5/14 may be a significant corrective low in stocks and offer suggestions of how to use this information profitably.

Enjoy the video.

CLICK HERE to Watch the video

P.S.  To learn more about developing your skills and techniques as a trader, consider the Integrative Harmonic Trading mentoring course.

Pete

Non-Confirmation in Major Stock Indexes - What to Expect Next

Stock Market Update 12-12-13  Non-Confirmation in Major Stock Indexes - What to Expect Next This stock market update video covers the DIA etf abd shows a bollinger band set-up that indicates that the market is likely to experience at least another day or so to the downside before reaching its nearby fibonacci support level. However, there is a significant non-confirmation between the market indexes in that only the Nasdaq reached a higher high for the rally into Dec 9th. The Dow, S&P 500, Russell 2000, and NYSE all topped lower than there Nov 29th highs. This may be an indication that the stock market is topping on the current leg up, and that stock may experience a correction from these levels. A typical correction is ~10-11% and 6 weeks duration based on historical corrections in the S&P 500.

How to Move Stop Losses to Stay With the Major Trend - Stock Market Update 11-25-13

  Stock Market Update 11-25-13 How to Move Stop Losses to Stay With the Major Trend

 This stock market update video covers multiple time frame analysis of the S&P 500 tacking ETF, SPY.  The MACD indicator is analyzed at the 15 min, 1 hr, 2 hr, 4 hr, 1 day, 1 week, and 1 month time frame.  Bearish divergence is present on the MACD on the lower time frames, warning that the stock market could potentially be ending an uptrend of varying degrees.

However, price is the final say, and divergence patterns can fail to lead to meaningful reversals.  Given that we are currently in the seasonally strong time for stocks and the market is at all time highs with no overhead resistance, this is a distinct possibility.

I also show you a simple, yet very effective way to trail stops using the MACD indicator  relative to price action.  This method will allow you to stay in most large trends and failed divergence patterns until the trend is done or nearly done.

Multiple Time Frame MACD Divergence in S&P 500

Multiple Time Frame MACD Divergence in S&P 500 
This stock market video looks at the S&P 500 across multiple time frames and notes a bearish divergence in the MACD at weekly, daily, and 30 min time frames.  This type of multiple time frame MACD bearish divergence can signal significant turning points as happened in bonds in July 2012.
We review a low-low-high time cycle that suggests a possible time symmetry for Nov 19th as a high point.  Also, we look at bollinger bands and the current action relative to the upper bollinger band.
Stock indexes formed bearish reversal candlesticks (bearish engulfing patterns) today with both technical and sentiment divergences present.  I discuss trading tactics to take aggressive short entries in the market and discuss how to quickly reduce risk, while still maintaining the potential for a large gain.

A New Video Is Available

Yesterday I recorded a new video for members of StockMarketAlchemy.com.  The video covers analysis of the S&P 500, and looks at how to trade individual stocks using the analysis criteria taught in the Trader's Crystal Ball eCourse.

A detailed example analysis is done on UPL in relation to stocks and oil prices in the overall context.

If you have not created your free membership at my site, then you can do so and access the members videos by creating a password and login here.

I hope the video content is beneficial to your trading and ongoing market education.

Pete

How to Trade Bearish Engulfing Patterns - DIA Bearish Engulfing Pattern 11-7-13

How to Trade Bearish Engulfing Patterns
This stock market video update looks at the DIA etf of the Dow Jones Industrial Average.  Today formed a bearish engulfing pattern in the stock indexes which is a top reversal candlestick pattern in Japanese candlestick analysis.  Given that the market are in a short term overbought condition on technical indicators and there is a relatively large potential bearish divergence in the weekly MACD indicator on the stock indexes, this reversal could be significant.  Additionally, DIA only just poked above its September high on the charts and now has immediately reversed.  Failed breakouts are a general rule at major market highs, so we should be wary of that here.
In order to give you a more comprehensive picture of the markets I also discuss bearish divergences and non confirmations in the VIX and total put/call ratio which further suggest that stocks are at risk of some continued pullback here.  The October low is key support in my view.  A break of that low may mark a significant high in stocks.