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Total Put/Call Ratio at CBOE Highest in 4 Years. What's Happens Next?

byAdvisorAnalyst
October 16, 2014
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by Ryan Detrick
Fear is starting to take over, as many sentiment indicators are flashing levels that have marked near-term bottoms over the years. Ā Remember, once everyone sells, that is how bottoms can take place as only buyers are left. Ā 
One indicator that caught my eye yesterday was theĀ CBOE Total Exchange Put/Call Ratio. Ā This ratio came in at 1.53 yesterday, the fourth highest reading ever. Ā In other words, we saw massive bearish puts trade relative to bullish calls.

Here are all the times this ratio came in over 1.50. Ā As you can see, yesterday tied for fourth.

The big question though is can we call this event bullish? Ā Here are the results after big spikes in the put/call ratio. Ā Like most rare indicators, they tend to happen in clusters. Ā To take care of this, one month had to pass between signals for them to count. Ā This left just six signals.

Not really the contrarian buy signal is it? Ā Sure, just six signals could be viewed as statistically insignificant and potentially random. Ā Still, this is one of those things Iā€™d still rather know than not know.

Thanks toĀ Far & AwayĀ for the image.

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