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This subject came up awhile back. The index as of Tuesday is near a bullish
0.80 according to Bob Carver at http://www.marketclues.net .
"Stocks: Another Tuesday Turnaround®
Investor panic continued on Tuesday as any stock with any mention of that
dread keyword, ``partnership'', was sold indiscriminately. When fear is in
the air, investors' first reaction (often a good defensive strategy, by the
way) is to sell first and ask questions lately. Certainly, there are many,
many Enron and Tyco investors who got burned by being too patient.
But, when the majority is exhibiting strong fear, it's often a great time to
buy bargains. Our Intraday Dollar-Weighted OEX Call-Put Sentiment Ratio
registered a closing value of 0.37 (only 37¢ into calls for each $1 into
puts on the OEX). That is well into the territory where good bottoms are put
in and that's exactly what we think happened Tuesday.
A confirming indicator on the OEX is the Ansbacher Index, created by Max
Ansbacher back in the 1987 period. That index measures the relative time
premiums on OEX puts versus calls. The theory is that if OEX traders have
bid up the out-of-the-money put option time premium far more than the
correspondingly distant out-of-the-money call option time premium, sentiment
has gotten overly-bearish. That's bullish to a contrarian, of course, who
would then logically conclude that the market is ripe for a rally. The scale
of this option indicator is similar to our own Dollar-Weighted Call-Put
Ratio: low values are bullish and high ones are bearish. However, while our
Dollar-Weighted Call-Put Ratio is bullish when it drops to 0.50 or less, on
the Ansbacher Index a ratio of 0.80 or less is considered bullish and ratios
higher than 1.20 are considered bearish (1.00 is dead neutral, of course).
In case you're interested in learning more about this indicator, here's the
link ("http://www.usafutures.com/maxansbacher.htm";).
Tuesday's trading produced a value of the Ansbacher Index very nearly at
0.80, which is very bullish and confirms our other sentiment gauge. It will
be very nice to enjoy a rally in the market here!
"
bobr
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