BEARISH DIVERGENCE: DOW and 10-day SMA of CBOE PUT-CALL RATIO
The plot of the 10-day SMA (Simple Moving Average) of the INVERTED CBOE TOTAL PUT-to-CALL Ratio against the
DJI
- Dow Jones Industrial Average.
We can see that from the all time Highs back in Feb to the latest lower highs, the 10-day SMA of the INVERTED PUT-to-CALL Ratio keeps making higher highs even though the Dow is making lower highs.
The higher the INVERTED Put-to-Call ratio goes it is indicative of more Calls being bought for every Put being bought.
We note that bullish sentiment has reached extremes not reached in almost 20 years----- EVEN THOUGH THE DOW PRICE keeps making lower highs.
This is indicative of bullish sentiment extremes that is a contrarian indicator pointing to lower prices ahead for the Dow and the end of the Bear market rally (from the March lows) being close at hand.
I believe the Dow's Bear Market rally ended on June 8th.
Since then we have had one wave 1 from June 8th to June 15 and since then have traced out a 3-wave ABC corrective wave 2 retracement which should be either at an end or will be at an end with another minor high in the next 1-3 trading days.
Risk-Reward favors a change in trend due to such Bullish sentiment extremes and the safer trade is the SHORT side.
Cheers!
Cyrus
DJI
- Dow Jones Industrial Average. We can see that from the all time Highs back in Feb to the latest lower highs, the 10-day SMA of the INVERTED PUT-to-CALL Ratio keeps making higher highs even though the Dow is making lower highs.
The higher the INVERTED Put-to-Call ratio goes it is indicative of more Calls being bought for every Put being bought.
We note that bullish sentiment has reached extremes not reached in almost 20 years----- EVEN THOUGH THE DOW PRICE keeps making lower highs.
This is indicative of bullish sentiment extremes that is a contrarian indicator pointing to lower prices ahead for the Dow and the end of the Bear market rally (from the March lows) being close at hand.
I believe the Dow's Bear Market rally ended on June 8th.
Since then we have had one wave 1 from June 8th to June 15 and since then have traced out a 3-wave ABC corrective wave 2 retracement which should be either at an end or will be at an end with another minor high in the next 1-3 trading days.
Risk-Reward favors a change in trend due to such Bullish sentiment extremes and the safer trade is the SHORT side.
Cheers!
Cyrus
