Some bizarre action today. As a resulted of this morning's weak market open, the first intraday reading of the total put/call ratio at 10:00 was a stratospheric 1.89. Such a high reading would normally be associated with full fledged panics like in September 2008. In fact all through the bear market of 2008, the put/call ratio never closed higher than 1.52 for the day! I believe however, that Tuesday's initial sky high reading could be largely attributed to options expiration this Friday and thus doesn't have as much contrarain bullish implications as it would seem...but it's still bullish. With everyone and their grandmother still worried about a "correction", a lot of fund managers and speculators probably loaded up on cheap October puts this morning thinking that the correction would finally come. But as per the motto of this blog, when there are a lot of people leaning on one side of the market, especially when it's against the trend, Mr. Market will make fools of them and that's exactly what happened. By the time the market closed the put/call ratio settled down to 1.15 which is still quite high. The equity only put/call ratio however was quite low at 0.54. I don't think I've ever seen such a massive divergence like this. The divergence was the result of massive index put buying.
It's quite clear to me that so many people bulls and bears alike are looking over their shoulder for that "correction" that just has to happen. This iss a situation that reminds me a lot of late summer of 2009 and the correction didn't come until it created maximum bear frustration and when it did come it wasn't anything too serious unlike the flash crash.
With the market hitting yet another rally high today and closing near the best level of the day, once again it suggests the rally is not over. Unlike in early August when I noticed that the lemmings from all walks of life where embracing the long side, thus making the market vulnerable, this time around the lemmings have been fighting this rally tooth and nail refusing to give up on underwater bearish bets because I'm sure they feel that the moment they give up the market will tank. Well, that's probably true, but until enough of these clowns actually do give up, they are going to keep seeing red in their accounts.
My best guess is that sometime next week or the week after we will finally get the "correction". I doubt it will be a serious one though because that LT wall of worry that I've been taking about for over a year is stronger than ever. I can still sense the deep rooted chronic pessimism out there. You can tell because the average trader is frustrated as the market has been going higher. Instead of seeing people bragging about how much money they've been making I see the opposite. Hissy fits and account blow ups. Remember I told you about that guy who bet large in Oct 49 QQQQ puts? Well, he confirmed himself he's got 3 more day until most of his nest egg gets blown up unless the market takes a big nose dive. I have zero sympathy for anyone who risks a big chunck of their life savings trying to pick a top using front month options. What a fucking doorknob. I do feel sorry for his wife though.
What a bizarre world this has become when you see so many people hating it when the market goes up. Go to the yahoo message SPY message board or market watch and you'll see what I mean. And how many times now have I documented someone losing their life savings by betting against the market? What a bunch of bitter, miserable, sorry SOBs so many people have become....can't say I feel the least bit sorry for them when they lose. It's this deep rooted hatred and pessimism from such losers of trading and probably in life too, which keeps makes me long term optimistic.
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