Put/Call Ratio

Discussion in 'Technical Analysis' started by kalikahuna, Jul 25, 2006.

  1. Hello,

    So, I've been reading Headley's Big Trends in Trading and he has a section on Put/Call ratio

    He states that a ratio of over .8 is considered an oversold situation, where a ration below .4 is considered an overbought situation.

    However, if you look at put/call ratios for the indices going....it rarely is below .7, in fact for the most part it isnt even below 1. This includes days in which the market rallied quite a bit. He says that ratios above 1 are super oversold positions and represent rarities...but the real data shows that to be actually common

    Is this guy completely wrong in using put/call ratios as a market indicator?
  2. don't believe or use anything you read in books - just use the ideas as food for thought then verify everything yourself. For example, look at the P/C chart vs the stock and determine for yourself if it is working on a stock-by-stock basis.