Put/Call ratio suggests market may be close to bottoming? 

Price is always the final arbiter, but sometimes anecdotal evidence can tell us an additional story, especially when at extremes. In this case lets take a look at the CPCE: equity put/call ratio. On Monday it spiked to 0.94, which is ebrn higher then the 0.91 reading during the mid-October 2014 Ebola scare 10% correction. Signaling a bottom. In August of 2014 it spiked to almost 1.05 also signaling a bottom. In fact readings above 0.80 often coincide with a tradeable bottom.

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But how does the 0.94 reading compare longer term? Well, during the 2011 Primary II correction and the spring 2012 correction CPCE spiked to 1.05-1.10 and 1.00, respectively. Hence the current reading is extremely high, adding weight to the evidence that a bottom may be in.

Intelligent Investing is celebrating it’s first year with this new website. As such everybody can now join I.I. for FREE for one month*. Please click here to sign up now.

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