Monday, May 22, 2006

Investor Anxiety Peaking

The CBOE put/call ratio is again above the 1.0 level. According to my data, the 10-day put/call moving average is at its highest levels (1.11) in over 10 years!

My colleague Scott Rothbort notes this morning that implied volatilities are hitting their highest levels (vs. 200-day averages) since the market bottom in October 2002.

Also, the AAII bull/bear survey is back at negative levels (more bears than bulls). And the Rydex Nova/Ursa ratio is at a multi-year low (0.11) as well. My sense is that the bears are overplaying their hand here, and if this market turns higher, there could be a flurry of short covering.

And this coincides with a market that is heavily oversold, technically.

Friday's action showed a strong reversal on higher volume. So that's a good sign. If this market is going to bounce, we should see a strong follow-thru day somethime this week.


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