Options Traders Dip a Toe In on the Bullish Side
It remains an either/or market.
You're reading 0 of 1 free page.
Register to read more or Unlock Pro — 50% Off Ends Soon
The action in the majority of tech stocks these last few weeks has really taken its toll on sentiment. Anecdotally, I see so few willing to step to the plate and go to bat for the names they used to love.
Oh, don’t worry, they still like the chip stocks: Micron, NVIDIA, and even Broadcom (who I always want to call Avago due to its ticker symbol). But software and the former Mag 7, not so much. I can hear it in the interviews I see on Financial TV. I can see it in the research reports I read. And as I noted yesterday, we see it in the ISEE Equity call/put ratio.
The folks who have been buying calls nonstop for a year pretty much stopped two weeks ago. But you know what? They stepped a toe back in on Wednesday. It was the first day in twelve trading days that we saw the ratio back up over 2.0. That’s good news. And bad news.
It's good news because the ten-day moving average turned up, which you can see is typically associated with a rally in the S&P (and likely a better match-up with Nasdaq). The bad news is I’d rather see a continued Wall of Worry, not a desire to get back on the call option train.
Then there is the equity put/call ratio over on the CBOE. After Tuesday’s action, it chimed in at .83. That is quite high (a lot of puts being bought relative to calls) for a day the market mostly did very little. I suspect we saw that fall on Wednesday, though.
However, the ten-day moving average of the total put/call ratio is now at .94, which is a smidge higher than it was at the November low. And that is why I say folks are rather upset with tech.
I mean, we know they are not upset with energy. Not with staples, not with materials, etc. So it has to be the group that is down: tech.
The Investors’ Intelligence Bull/Bear Ratio is still high, having come down from that reading over 4.0 three weeks ago. It’s not down enough for me to say folks have had a major change of heart, but do take a look at the Bulls. A mere two weeks ago, they were over 62%. Now they are at 54.7%. I would just note the bears haven’t changed, as they remain at 15% so it’s just the bulls who have had a change of heart.
I would still like to see 6800 broken like it means it, but maybe we will see tech rally first. Tech is oversold; the 493 are not. Breadth was quite modest on Wednesday, and you can watch the stocks making new highs on the NYSE to see if they expand. Thus far, the peak reading is 417, and Wednesday’s reading was 167 (down from 188 the prior day). So it seems to me the new down and outers (I’m looking at you software/tech) are the ones that caught a bid. Thus, the Either/Or Market remains intact.
