Instead of looking at the entire market, I decided to take a deep dive into SPY this time and get a good idea of what’s happening. Hopefully someone can correct me if I’m wrong.
PCR aka Put-Call Ratio; this is defined from Investopia as “an indicator ratio that provides information about relative trading volumes of an underlying security’s put options to its call options. The put-call ratio has long been viewed as an indicator of investor sentiment in the markets, where a large proportion of puts to calls indicates bearish sentiment, and vice versa.”
The strategy behind PCR is when “above 1 is considered to be an indicator of a selloff while a put-call ratio below 1 is an opportunity to buy. Some traders use the put-call ratio as a contrarian indicator, and buy when the ratio is above 1 and sell when the ratio is below that figure.”
Now look at this fucking chart below that I made from data obtained at yahoo finance.
Yes that is a PCR Ratio at about 15 on May 1st. The Red line is at a constant of 1. Here is another chart with volume and open interest (in %) overlay as well.
Looking at his it seems like a massive sell off is coming in may and the PCR stays consistently above 1 from 3/27 all the way until then. Correct me if I’m wrong…
tldr; SPY BIG drop incoming in May
Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.