Overreact much?

Discussion in 'Technical Analysis' started by Locutus, Jun 13, 2011.

It's hip to be bear?

  1. Yes, we gonna crash fosho! Buy more puts!

    2 vote(s)
  2. Nah, them be pansies!

    1 vote(s)
  3. I don't like you.

    1 vote(s)
  1. Locutus


    Well, maybe this deserves a thread. The 5-day MA of the CBOE equity-only P/C ratio is now above the level it was at during the March 2009 lows. If we sink any further they'll probably hit the lowest point of the last decade(s). Graph attached (p/c is inverted and I think it doesn't show the scale for it but oh well, tough).

    Obviously this fact in itself has no relevance because the market is very different from that time. What does have relevance is that this level is
    a) Much higher (or lower on the graph) than during the bottom in March
    b) Somewhat higher than the highest point in May 2010 (which at the time did not mark the low but was not very far off)

    There are a few other measures that show that traders are betting on the end of the world while prices haven't really come off much (VIX ratios is one other, then there's the TRIN and probably something I forgot).

    So are people right to bet that this tempest in a teapot correction is going to turn into a real storm or are we worried for no reason?

    My personal take is that the downside will be very limited going forward but the upside is rather uncertain also while mr. market wrings out the momos.
  2. Bowgett


    I don't see anything attached.
  3. Locutus


    Oh, and here's the attachment, I forgot, but really doesn't everybody know this already?

    By the way, another observation is that the VIX usually reacts to these kind of extremes and that it hasn't at all. Premium sellers are gobbling up all this activity. It's probably because there is no spike in volume which makes this a bit tricksy and different from "normal" corrections.
  4. Eight


    The world economy is just circling the drain.

    Socialism is in worldwide, world-class meltdown. It never was a good idea but there was no way to get people to understand that, now they can starve or whatever and some might learn from that... or not! LOL The tax burdens from the bailouts are making people that could create jobs and commerce just hunker down probably.

  5. Locutus


    Yes it is.

    Anyway this thread isn't about the economy. It's about whether it's hip to be bear and that has unsatisfying correlation with whether the economy is looking weak right.
  6. J .... You have become stealth in recent posts :D