Is A Major Market Bottom Brewing?

Two weeks ago we had the terrorist attack in Spain. We saw market conditions similar to today right after the 9/11/01 attack on the US.

I track the weekly close of put/call ratio. Last week it closed at 1.05 and this week it closed at 1.03. It has only closed above 1.0 twice in the past four years:

DATE P/C ratio P/C 10DMA S&P500
------------------ --------- --------- ----------
Sept 10/21st, 2001 1.01/1.27 0.81/0.94 1093/966
June 14/21st, 2002 1.15/1.27 0.93/0.98 1007/989
Mar 12/19th, 2004 1.05/1.03 0.97/0.86 1121/1110

What I find interesting from the above table and chart is major bottoms were set weeks after the put/call ratios closed above 1.0 two weeks in a row.

Except for about 10% of my assets in the "explore" part of my portfolio, I'm not a market timer. With that said, I might guess a major bottom at 1,000 (perhaps spiking down to match the 944.8 low set in 2001) would provide the needed "symmetry" that I like to see in a recovering market.

Of course, the bottom could already be in, or we might be seeing a 50% retrace of the fall from the peak and the market is just having a bear market rally before it rolls over to set new lows as the bears predict.

Now if I look at the weekly close for the 10-day moving average of the put/call ratio, it has only closed above 1.0 twice in a row on Sept 20th & 27th 2002 when the S&P500 was 845 & 827. A final weekly low was 801 on October 4th, 2002.

As the chart above shows, the 10-day moving average of Put/Call closed above 1.0 for two weeks in a row before the final weekly market low was set on 10/4/02 at 801.

Here is that same CPC chart for today:

This chart shows how there is far less complacency in the markets these days than just weeks ago.

For over a year, the 10-day moving average (DMA) of Puts to Calls has been below 0.90. Now it is over 1.0!

This chart shows how the 10 DMA just barely poked above 1.0 before the October, 2002 bear market bottom and again just before the March, 2003 low.

Go To Page: 1 2 3