Money Control Place
  • Politics
  • Business
  • Stocks
  • Investing
  • Politics
  • Business
  • Stocks
  • Investing

Money Control Place

Stocks

A Very Accurate Sentiment Reading That Is Flashing A RED Light For Bulls

by February 19, 2024
February 19, 2024
A Very Accurate Sentiment Reading That Is Flashing A RED Light For Bulls

While many analysts follow sentiment signals that involve feelings about market direction, I prefer one that follows the MONEY. I want to know what retail traders are doing with their money with respect to options. Extreme readings provide eerily accurate reversals in trend, which are obviously very important to any trader. I like to call the 5-day SMA of the equity-only put-call ratio ($CPCE) my “speed boat” sentiment indicator as it’s excellent at predicting SHORT-TERM reversals. I track the CPCE using the User-Defined Index (UDI) tool here at StockCharts.com. Over the past two years, there have been occasions (mostly during Q4 on Wednesdays) when hedge funds have bought a MASSIVE number of equity puts on many of the largest cap companies in the world, like Apple (AAPL), Microsoft (MSFT), Amazon.com (AMZN), Alphabet (GOOGL), NVIDIA (NVDA), Meta Platforms (META), Tesla (TSLA), etc. These equity puts need to be adjusted OUT of the ratio, because they do not reflect on the retail option trader. Here’s my adjusted 5-day SMA of the CPCE over the past couple years:

The CPCE measures the amount of bullishness (low CPCE readings) and bearishness (high CPCE readings) in the options world. Extended periods of bullishness and bearishness are marked in the chart with red arrows and green arrows, respectively, as the 5-day moving average of the CPCE moves toward one extreme or the other. Any time that we see the 5-day CPCE reach the .55-.57 range to the downside (or lower), we can look for a possible short-term market top. Note that subsequent market declines may be quite brief, and sometimes very mild. The takeaway here is to realize that low readings, like the one we have right now, provide us a warning that the RISK of a market decline has increased substantially. Managing risk is a top priority for successful traders.

This low potentially-bearish reading on the CPCE will very likely impact the timing of our entry into 10 equal-weighted stocks in each of our portfolios at EarningsBeats.com. We just completed the end of our latest quarter, where our flagship Model Portfolio gained 21.87%, easily outperforming the S&P 500’s gain of 10.08% over the same period. Since the inception of our Model Portfolio in 2018, its performance has more than doubled the S&P 500 as well, 182.59% vs. 86.03%. We’ll be “drafting” our Top 10 Stock Picks for our Model Portfolio, as well as our Aggressive and Income Portfolios, on Tuesday, February 20th, at 5:30pm ET. For more information and to register for this FREE event, simply CLICK HERE.

Happy trading!

Tom

0
FacebookTwitterGoogle +Pinterest
previous post
Week Ahead: NIFTY Stays In A Defined Range; Expect Directional Moves Only Outside These Levels
next post
Young adults are getting used to living on a financial cliff

Related Posts

Stocks Selloff into Close After Failing at Resistance

August 9, 2023

Buy Breakout or Fade Divergence on Growth Stocks?

March 30, 2024

Three Bearish Candle Patterns Every Investor Should Know

July 18, 2025

Trend-Following Stocks: How a Low ADX Can Signal...

April 4, 2025

S&P 500 Makes a New All-Time High By...

April 27, 2024

Spot The Warning Signs of Bankruptcy!

March 16, 2024

Here’s a Scary Scenario for You: S&P 500...

October 4, 2023

Uncover the Week’s Key Stock Market Movements

March 22, 2025

Week Ahead: NIFTY May Stay Tentative; Look For...

June 16, 2024

The Secret Sauce! Expert Investors Use This to...

January 13, 2024

    Get free access to all of the retirement secrets and income strategies from our experts! or Join The Exclusive Subscription Today And Get the Premium Articles Acess for Free


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Latest

    • S&P 500 Breaking Out Again: What This Means for Your Portfolio

    • CHARBONE Hydrogen Announces Closing of a Second and Final Tranche, Oversubscribing its $1M Non-Brokered Private Placement

    • CHARBONE Hydrogene annonce la cloture d’une deuxieme et derniere tranche de son placement prive sursouscrit sans intermediaire de 1 M$

    • Spartan Metals Announces Director and Officer Changes

    • Bold Ventures Discovers New Style of Mineralization on Its Wilcorp Property

    • Finlay Minerals Announces Non-Brokered Private Placement of Flow-Through and Non-Flow-Through Units

    Categories

    • Business (1,395)
    • Investing (2,990)
    • Politics (3,699)
    • Stocks (1,811)
    • Uncategorized (20)
    • About us
    • Contact us
    • Privacy Policy
    • Terms & Conditions

    Disclaimer: MoneyControlPlace.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2025 moneycontrolplace.com | All Rights Reserved