Put/Call Ratio Rally

Today 01/04/23 all three main U.S stock indices ended the trading session above the prior trading day close.  Surprisingly the Put/Call ratio (PC) also closed the day to the upside.

The daily PC and S&P 500 (SPX) chart courtesy of Trading View illustrates their relationship since August of 2022.

Investor’s Business Daily uses  readings above 1.15 as a signal for potential US stock market bottoms.

On 01/04/23 PC reached and closed above this level at the same time the SPX also closed the session higher than the prior day.  This is  the second time  in  two weeks that this unusual phenomenon has occurred. Note, other  than the prior occurrence on 12/21/22 all other times  PC went above 1.15 it either ended the session below 1.15 and/or the SPX closed the session lower.

Also note that on  12/28/22 PC had its highest reading since the March 2020 SPX crash.

The 12/31/22 blog “Bear Panic Point” illustrated that on 12/13/22  it appeared the SPX made an important top in the area of its 200 – day moving average and the declining trendline from the January 2022 all-time high. 

Today’s relatively high PC reading is additional evidence that the bears are eager to make downside bets on the rally after  the 12/13/22 to 12/22/22 decline. 

The release of the FOMC meeting  minutes on 01/04/23 did not decisively move U.S stocks.

Since 12/19/22 the SPX has been in a trading range.

The SPX could have a big  move on 01/06/23 with the release of the December U.S employment report. 

Perhaps on 01/06/23 we could find out if the bears have been rewarded, or are in a world of pain.


Published by Mark Rivest

Independent investment advisor, trader, and writer. Articles have appeared on Technical Analysis of Stocks and Commodities , Traders.com Advantage, Futuresmag.com, and Finance Magnates.

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