Short-term Outlook (1-5 Days):  25% Bearish  From Apr 13, 1194 SPX

Equity Indicators - Updates and Extremes

Equity-Only Put/Call Ratio

I'm just not sure how much more there is to say about this.

We saw on Monday that traders are as ebullient as any time since March 2000 according to the ratio of bullish versus bearish options strategies being employed.

Now it's just getting ridiculous.

Yesterday, the Equity-Only Put/Call Ratio dropped to 0.32, the lowest reading since January 16, 2004.  In relative terms, that is 45% below its six-month average.  That, my friends, has never happened before (at least going back to 1997).

Yes, option expiration is approaching, but I've always found that to be a poor excuse to dismiss extreme put/call readings.  The only real exceptions are when we see one stock absolutely dominate options trading due to a news event.

That could be the case from yesterday, as once again Citigroup call options were extremely active, many of them trading for mere pennies.  Surely there are a lot of games being played with that stock as we head into expiration...maybe these financials have become the new lottery-ticket penny stocks.

NYSE New Highs

As a percentage of total issues traded, the number of securities on the NYSE that marked a new 52-week high yesterday surged to nearly 20%.  Again.

That's the second-highest in 24 years, next to the surge we saw in mid-March.

We discussed this on the morning of March 18th, as the previous day had also witnessed a spike in new highs to nearly 20% of the total.

At the time, the conclusion from the few precedents we had was weakness if anything in the short-term, but then skewed more towards strength the longer out we looked.  I suppose we could say it followed through on that (so far), as we got 2 1/2 days of weakness immediately afterward (hey, that's a major decline nowadays!), and obviously strength since then.

Indicators At Extremes

The surge in the market caused a not-too-surprising rise in the number of bearish (for the market) indicators we show on the site.

What was surprising was the degree.  The current level is the highest since May 15, 2008, and is on a par with the highest of the past five years, when we had about an equal number of total indicators as we do now.

The table below shows how the S&P 500 performed in terms of risk versus reward over the next week after the prior extremes.

The average risk was nearly twice the average reward.  Only once did the S&P manage a gain of more than +1% during the weeks, while it lost more than -1% four times.  All of them but one showed a risk greater than reward.

They didn't necessarily signal major intermediate-term peaks, but in the short-term at least, any further upside was limited and not sustainable.

Nasdaq Cumulative TICK

Some have asked about the TICK reading we update intraday for the Nasdaq.  Yes, the reading is correct.

For a while, we had a chance at recording a new all-time high, back to when I started gathering data in 2001.  But it settled down a bit and we didn't quite make it.  Still, it is the highest in nearly eight years.

There were only three other dates that even come close to the current extreme:

October 4, 2001:  The NDX was coming off a major low, but still backed off for 3 days before rising again.

May 2, 2002:  The NDX dropped hard for the next 3 days.

May 15, 2002:  The NDX managed to rise a bit for the next 2 days, then rolled over into a major decline.

Since then, the TICK hasn't managed to get above +4000 at any point, even intraday, much less to the +5300 level it closed at yesterday.

Truly remarkable.