A Quick Look at Sentiment in the Stock Market

I find it interesting--and surprising--that the five-day equity put/call ratio is hovering at its lowest level since the start of 2014.  Amidst concerns about rate hikes and Greece, traders of individual stocks don't seem particularly bearish on their names.  Breadth also continues mixed, as we had 594 stocks across all exchanges make fresh monthly highs and 530 register new monthly lows.

When the five-day equity put/call ratio has been in its highest quartile going back to 2012, the next three days in SPX have averaged a gain of +.55%.  When the five-day ratio has been in its lowest quartile, the next three days have averaged a gain of only +.03%.  In general, we've made the best returns when traders have been most bearish on individual stocks, and that isn't happening at present.

Further Reading:  Reassessing Trading Strengths and Weaknesses
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