Weekend May 23 2020
All Fear has abated.
A put is a bet that prices will fall.
A call is a bet that prices will rise.
The put call ratio measures fear versus confidence. The higher the number, the higher the numerator, hence the higher the fear.
The lower the number the more confidence has won the day.
The line on the left is pre virus, confidence was high and the P/C ratio was low.
Now the P/C ratio has returned to the what me worry level but the S & P is t least 300 points lower.
Again this is a negative divergence.
Notice the ratio peaked during the third wave down i the SPX at top.
The FED is 'goosing' the stock market. It buys bonds and the money flows into stocks, since the money is in the hands of fund managers, it flows to the best performing FANG stocks. And so the FED has raised the stock market level artificially high.
Could the down turn be worse because of just that, an artificial sugar high courtesy of the FED billions pumped in every day
while mortgage payments and other loan delinquency proliferate?
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