Put To Call Ratio Unexpectedly Jumps To Three Month High

Put To Call Ratio Unexpectedly Jumps To Three Month High As S&P Makes New Highs

Submitted by Tyler Durden on 01/04/2011 09:30 -0500

After the equity-only put to call ratio for most of December had been at very suppressed levels for most of the month, it suddenly jumped rather notably on Friday, pushing to a level not seen in well over three months. Courtesy of Sentiment Trader we have some historical observations of what happens when the S&P trades within 1% of a 52 week high concurrently with the Put to Call ratio jumping to a multi-month high: for those who still care about technicals, here is the verdict: "there was only 3 other days when the S&P 500 was trading within 1% of a 52-week high and the put/call ratio surged to at least a 3-month high.  Those dates were 2/24/05, 4/26/06 and 10/3/06. After the first two, the S&P jumped a little less than +2% over the next 7 days, then slumped -7% over the next 30 days.  The two were remarkably similar.  Not so the last instance, which also rose about +2% over the first 7 days...and then just kept right on going."
Full observations from Sentiment Trader:

This is no doubt due to low-volume conditions and year-end shenanigans, but there was more trading activity in put options on the Chicago Board Options Exchange on Friday (relative to calls) than there has been on any other day since August 31st.

Going back to 1997, there was only 3 other days when the S&P 500 was trading within 1% of a 52-week high and the put/call ratio surged to at least a 3-month high.  Those dates were 2/24/05, 4/26/06 and 10/3/06.

After the first two, the S&P jumped a little less than +2% over the next 7 days, then slumped -7% over the next 30 days.  The two were remarkably similar.  Not so the last instance, which also rose about +2% over the first 7 days...and then just kept right on going.