NASDAQ The Put/Call Ratio shows it's time to buy stocks NOW!

This is another stock index long-term analysis and this time our focus is on the Nasdaq (NDX). For better illustration we are displaying the Nasdaq as a line instead of candles (black trend-line) and the Put/ Call Ratio (blue trend-line) on the 1W time-frame.

First let's explain what this ratio is. Basically it is the number of put options divided by the number of call options. This is an indicator that essentially illustrates the pessimism/ optimism in the market, what market participants (investors, traders, funds etc) feel is going to happen in the (near at least) future. When it is rising it means that there is a lot of pessimism and more people are betting on the downside and when it falls it illustrates that more people expect an upside.

For this analysis we've put the MA20 of the Put/ Call Ratio (PCR) as it filters the noise more efficiently. As you see, since the October 10 2011 High, every PCR peak is made on a Lower Highs trend-line (dashed line) and the price gets rejected. When that pull-back happens, it effectively gives us a confirmed signal to buy stocks. This time the peak on the Lower Highs trend-line took place on the June 13 candle and as you see it turned out to be the most optimal place to buy as the index rose aggressively. The current rise though on the PCR is naturally translated into a Nasdaq pull-back put since the 2009 financial crisis, this happened most of the times and didn't affect the long-term bullish trend.

So will you take advantage of this pull-back?



P.S. Because the chart has added elements (PCR, Nasdaq) plotted that are not stable on the axis, it may appear distorted based on your screen's/ browser dimensions. The original looks like this below, so if yours doesn't, adjust the vertical/ horizontal axis in order to make it look like this and better understand what is illustrated:



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