Here we see the 15-day equity put/call ratio (pink line) plotted against the S&P 500 Index (blue line) from January, 2004 to the present. Note how spikes in the options ratio have marked excellent intermediate-term buying opportunities during this period.
Perhaps even more interesting, observe how we've been riding a wall of worry during this bull market. We've been tracing out higher lows and higher highs in the equity put/call ratio. While some have referred to this market as a "bubble", it is difficult to make the case that we're seeing excesses of optimism that would be characteristic of a market peak.
With respect to the present market, we can see that troughs in the put/call ratio have tended to precede price tops during market swings. We've yet to see such a trough in the recent market, suggesting that we could have further to go on the upside during this swing.
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