thanks a lot for your kind words.

Options (volume, Puts and Calls trading on an Up- and Downtick) are part of my analysis, but I rarely take into account Equity or Index Put/Call ratios. The CBOE Equity Put/Call ratio of the 90th is completely different (with respect to regular readings, averages and so on) to the last decade. A reading of 0.42 (like on Tuesday) was nothing to write home about between 1996 and 1999, while there were only 14 sessions since 01/01/2003 closing lower than 0.42.

Renny Young at MarketTells shows that three lower closes for the Equity Put/Call Ratio has positive implications, but that it is difficult to read anything into an absolute level or a temporary low (like the lowest reading of the last month).

In addition:
I just check for the follwinig setups:
1) The SPY’s RSI(2) closed above the 95 level on two consecutive sessions (winning streak) while the $VIX closed higher on the last three sessions. 10 occurrences since 1990, the SPY was trading at a higher level 10 days later on 8 out of those 10 occurrences.

2) The SPY’s RSI(2) closed above the 90 level on three consecutive sessions while the $VIX closed higher on the last three sessions. 14 occurrences since 1990, the SPY was trading at a higher level 10 days later on 12 out of those 14 occurrences.

3) The SPY closed higher on three consecutive sessions while the $VIX closed higher on all three sessions as well. 12 occurrences since 1990, the SPY was trading at a higher level 10 days later on 10 out of those 12 occurrences.

Downside potential was more or less non-existent with respect to all three setups. From my perspective, the market is climbing the famous ‘wall or worry’. I didn’t find any bearish implications and checked for Larry McMillans tweet as well. Unfortunately he didn’t post his setup, historical occurrences and respective probabilities and odds in order to check against his specific setup.

Best,
Frank

Thanks for this analysis — very interesting stuff. Larry McMillan (option strategist) just tweeted the following: “In the past, when $VIX has risen for 3 days while the market is on a long winning streak, that is usually a very bearish combo”

Have you ever looked at the scenario he talks about? There has also been some interesting put/call ratio readings of late — a few days of high index puts vs. calls combined with a low ratio for equities only. do you ever factor options into your analysis? That was one interesting part of your ex-dividend analysis — since the spy goes ex-dividend on option expiration, it could be that monday is often down as part of an expiration hangover rather than something strictly dividend related.

thanks

Kyle