Loading ...DAILY PUT/CALL RATIO CHART
Another interesting aspect of this setup is the correlation to the PUT/CALL ratio on the chart below. Every instance of the Put/Call ratio that fell below 0.80 for an extended period of time (2014, 2018 and now), prompted a downside price reversion of -10% to -15%. Additionally, each instance of this setup (2014 and 2018) prompted an extended period of price volatility and rotation.
In 2014, the initial downside price reversion prompted a -13% to -15% price correction followed by nearly 8 to 10 months of extended price rotation before finally entering a new bullish price trend in late 2016. Additionally, in 2018, the initial downside price reversion event wiped out nearly 12% of the value on the initial downside price move from this event. Subsequently, over the next 12+ months, a second downside price move wiped out over 20% of the value from the SPY.
The current setup suggests any potential downside price reversion resulting from this setup we are alerting you to could easily target -12% to -15% on an initial reversion event. Ultimately, the rest of 2020 could result in a very volatile year of price rotation if history teaches us anything.
Remember, this is not a confirmed trading trigger. This is a warning that a price and technical setup is occurring in the markets that may become of real value to you in the immediate future. The combination of these three charts, the SPY, the VIX and the PUT/CALL ratio, should be enough for you to understand there are real risks of a price reversion event setting up in the markets right now. All we need to confirm this setup would be for a broader market breakdown event to begin to take place. Then, we would watch what happens to the SPY near the $295 to $300 level.