mrodlauer

Sentiment Check - Put Call Ratio (5 Day MA, 0.8 threshold)

Short
SPCFD:SPX   S&P 500 Index
Put / Call ratio below 1 indicates bullish positioning and sentiment (and vice versa). When the 5 day Moving Average of PCR falls below 0.8, equity markets at large (using SPX as proxy) are generally overbought and sentiment has overshot the reality on the ground. Typically yields some kind of pullback shortly thereafter, while any gains seen behind the signal are given back in the following month more often than not

Comments

FWIW, I'd be targeting IWM or QQQ on a short thesis given the valuation dynamics and underlying fundamental / style characteristics of the index constituents. Vol should continue to compress through Friday's close (and it will be difficult for negative flows to take hold on a short / interrupted week), and I will be coming in rather aggressively on a combination of longer dated (larger position) and shorter dated (smaller lotto position) puts on IWM and QQQ
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