Wrap Up: Put/Call Indicator Hits 2nd Highest Level On Record
The market rallied again into the close, putting in a solid day. Volume again was nothing to write home about, but I'll take the positive price action regardless.
I continue to look for a tradeable bottom. I have commented several times on the oversold nature of the market, the rise in pessimism, the spike in volatility, and the high readings in the put/call ratios.
Today, the 10-day CBOE put/call ratio hits its 2nd highest reading on record (1.24). The first time I saw a reading near these levels was in May 2006. The market bounced nicely after this point, but then came back down to make a lower low in June 2006.
In March of this year, this indicator reached 1.32, an all-time record. The market bottomed quickly that time, and surged on to new highs. So this level on the put/call ratio is an important one, and warrants attention.
It it too early to know if we have seen THE bottom. Although some pundits will try to make such calls, ultimately we will only know in hindsight. The normal pattern is for the market to bounce, and then come back down at some point and retest these lows. Sometimes they hold, and sometimes the market goes lower.
But this summer correction is no different than the ones we have seen in each of the last four years. And the sentiment indicators are lining up such that I think it will eventually play out in similar fashion.