Market comments for June 17th: Put to Call ratio analysis

Something a little different today for my most faithful readers, I have some charts you will only find here. I have recently been comparing the period of June 2008 to June 2011 because we have recently logged in 12 days now of the Put to Call ratio exceeding a 1.00 reading. I thought today a bit more refinement was in order to see what can be learned from a more in depth analysis.

To start with let me explain some of the data. There are Options of Puts and Calls taken out on stocks (Equities) and on the Indexes, like the Dow or S&P500. When I have reported to you that the Put to Call ratio has exceeded 1.00 for 12 consecutive days, I have included all of these Options in a Total reading. Today I am going to break down Equities from Indexes and am going to look at 2 periods, all of June of 2008 vs. June 2011 to the close yesterday.

Below are 4 charts. 2 of the charts are of the Equity volumes for 2008 and 2011 and 2 are for the Index volumes for 2008 and 2011. As you can see from all 4 charts that only one chart seems to have a real trend and that one is for Index Puts and Calls, (that is the first chart) and that the volume not only is trending but also that it exceeds all other Options Volumes for both periods.




To me this means that the biggest bets being made right now are being made for an overall market drop, hence the Index Put options rising to significantly higher volumes in 2011 than in 2008, before the major market correction down to 6,500 on the Dow. It seems to me that this time people are putting their money where their mouth is. Traders see that it isn't specific stocks which will tend to be hit in a correction, but rather the entire market. That is something to take note of.

UPDATE: 7:52am PST

Also of significant note today is that Options expire for the month of June and for the Quarter. Expiring equity, P.M. settled index options and treasury/interest rate option classes cease trading. Expiring cash-settled currency options cease trading at 12:00 p.m. EST. This is why the Volume is already over 148 Million shares in just a little over an hour this morning.

The Michigan Sentiment Index came in below expectations this morning for June. A reading of 71.8 is below expectations, which was 73.5 and below last month's 74.3 reading.

Market comments for June 16th

Another day and another market drop. The Dow closed down again yesterday as did our other Indexes. We start today with the Nikkei and European markets down again today because of the turmoil in Greece. Our Economic data was a little better this morning with Initial Jobless Claims dropping for the week of 6/11 to 414K. Expectations were for 425K, so this is a bit better and in the right direction.

Yesterday we closed with another consecutive day when the Put to Call ratio was =>1.00 for the 11th consecutive day. Yesterday's chart shows the history of this indicator and let's face it, people don't really feel that well about the economy or the stock market and are selling, rather than looking to buy on the dips. As long as that mindset is present, it does portend good times ahead for the Bulls, but does for the ever louder Bears.

Today's chart below is of 3 months for the Dow. Of particular interest to me and should be to you was not only the fact that we are getting lower lows and lower highs on bounces, but that the down volume is much stronger than the up volume. Yesterday, the volume was stronger than the previous 2 days of the market rising slightly. And then before that, the volume was higher too. The trend is still down, but we haven't yet gotten to the real scary drops that are coming. Don't say you had no clue of this coming!

The culmination of this in the form of a sharp deep drop may come in the next few weeks. Much is riding on the negotiations of V.P. Biden and the Congressional leaders who are trying to get enough votes to pass the legislation to raise the debt ceiling. It looks now like somewhere between $1 and $2 Trillion dollars will be reduced over the next 10 years, in the level of debt we have. However, if neither political party did nothing, the debt would rise $6 Trillion with what Congress has already approved. So cutting $2 Trillion is a step in the right direction, but not enough. We will be revisiting this issue for the foreseeable future. In the mean time, everyone knows that and many don't have the confidence to buy stocks, so drip, drip, drip, the market goes.

Today is the 100th Birthday of my former employer of 18 years, IBM. Happy Birthday, IBM! It was a great company and still is.

And lastly, I want to thank all those who wrote me privately yesterday on my Cisco article. It looks like many outside AND inside agree with my comments.

Market comments for June 14th

The latest data released this morning was on Retail Sales for May. Expectations were for -0.7% but the actual number came in at only -0.2%. See, that's an improvement. Retail Sales ex Auto came in at +0.3% and expectations were for the number to come in at +0.4%.

The PPI for May came in at +0.2% while expectations were for a reading of +0.1%. That's all the financial statistics for today which are meaningful although Business Inventories for April data will be released at 7:00am PST, I will not report it.

Dow Futures are up about 100 points today so expect that long awaited bounce this morning. But the overall trend appears to be down and with talk of more quantitative easing, it is clear the Fed sees deflation as the problem, not inflation.

Market comments for Dec. 9th

As you can see I haven't posted many comments on the market these past few days. There really hasn't been a reason to as nothing has really changed. On thing I wanted to add though was to watch the stock price of CAT, because it has led thus year's rally. But the last couple of days it looked like it topped and today it is forming a Hammer Candlestick pattern, which often is a sign of a reversal in trend. I have a 2 month chart on CAT below so you can see what I am referring to.

Puts and Calls Total Volume and what it means to the next market trend

Ok, for those of you early birds for Tuesday morning, I have compiled some interesting charts on the Total Volume of Puts and Calls from January 2009 to the close of the market today. The first chart is of the total of all Puts and Calls. The second chart is of all the Calls only. And the 3rd chart is of all the Puts only for this time period. What is fascinating to me is that the overall drop in total volume seems to be more related to people buying less Calls, than Puts. If things are getting better in the economy and hence the market, which is supposed to be a leading indicator, wouldn't you expect there to be more purchases of Calls. That's not what the charts show. The average of the Puts and the range are much larger and wider than the Calls. It says to me that the real money is betting on a correction, not a major rally like we had in most of 2009. What do these charts say to you? Leave a comment. And don't forget to come back to see the Consumer Confidence data Update after they are released at 10:00am EST.