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[RT] Re: Intermediate / Longer Term Top? for S&P500



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The concern I have with p/c ratios overall is that about 65% of the option
volume is nondirestional hedge trading. 75% in products like the OEX.  There are
also natural justifications for many forms of both put and call trading that
relate to interest rate issues and not direction.  As I've mentioned in the past
if you could eliminate the noise in p/c by looking at only a public opening buys
and compare puts to calls  (some firms do this internally .. based on their
internal ordeflow).  There are extremes however and then can and do occur when a
lot of other indicators are also telling the same story. Volatility spikes ...
which most often occur at major declines ... are almost always paired to huge
put buying.

P/C ratios .. like short interest figures ... don't tell the story they did
years ago when they were "pure" representations of public sentiment.

Remember also that between 80% - 90% of institutional option activity is
upstairs   -   especially true in S & P 500 options - so that what prints on the
floor is not a full representation and could in fact be really skewed by a large
upstairs trader using the floor to layoff a position.

Candlestyk@xxxxxxx wrote:

> << I would be curious to other RT'rs response to this post.
>  >
>  >     Following is the Weekly CBOE Put/Call (P/C) ratio which
>  >     is posted in Barron's each week....I have found that for the equity
>  market
>  >     "over belief" or greed exists when the ratio falls to 0.34 or
>  > below,...and    conversely..."over feared" levels are indicated w >>
>
> I have noticed that a value of .32 or less for CBOE (equities only) when the
> market is extended  indicates a short term top is is close.  When the market
> is approaching the previous high from a correction, low values are less
> significant.  Also, IBD Put/Call ratio of .40 and less in an extended market
> is also a good warning sign.
>
> RayF