One measure of sentiment that is notably underwhelming is the CBOE Put/Call ratio. This is a concern for some traders. As of today the 10-day put/call was 101.3. This is actually lower than the 200-day moving average of 101.7. Below are two studies that show what has happened when negative price action has been accompanied by a lackadaisical put/call:
This first one I looked at both above and below the 200-day moving average, and it made little difference. The implication of the Put/Call tests seems to be that a relatively low Put/Call doesn’t hurt the chance of a nice bounce. This was a bit surprising. Also a bit encouraging.
I just wanted to stop by and say thanks for the great blog! Although I don't trade in the short term, I really find your content refreshing. It's nice to read content that doesn't have hype in it. Just pure analytical analysis.
ReplyDeleteThanks for a great blog!
I am a regular reader and appreciate you sharing your backtesting results.
ReplyDeleteHowever, your results are skewed by your frequent choice of time periods wherein the general trend of the market has been up eg. 1996-present.
Anonymous, gee how much further back do we need to go back? does it matters if we go back another 10 years or so? it was THE biggest bull market from 1982 to 2000 and we did have one of the biggest bear market from 2000 to 2002.
ReplyDeleteJimmy
quant is definitely a great blog!!
ReplyDeleteVIX did hit 10% above the 10DMA friday near it's previous june high and then tailed away...mcclellan OSC ended with a zero change reading at -224, which shows major oversold and a trend day setup...we seem oversold enough for the end of month trade- ...larry conners: "The SPX gained 753 points from January 1995 through the end of 2004 (10 years). But, had you purchased the SPX the day before the last trading day of the month, and exited on the opening of the fifth trading day of the month (and you stayed out of the market the rest of the month), the gains were 820 points. That's right. Those six trading days, on a net basis, led to all the market gains. The remaining 14-16 trading days of the month led nowhere. Sixty-four percent of the trades were successful."...eddy elfenbein: "Since the start of this decade, investing in just the first day of the month has delivered a return of 35.4%."
-deac
Thanks all.
ReplyDeleteThe reason I used 1996-present in this study is that CBOE data is only available back to '95. I need 200 days to calculate a 200-day average. Therefore '96 was as far as I could go.
If a recent time frame shows results that are significantly different than previous to that, I will normally note this. The June 25th breadth study is an example of this.
Most any time frame will have a bullish tilt. The stock market has had an upward bias for over 100 years. This doesn't mean the results are skewed. It does mean that you should keep the upward drift of the market in mind when interpreting the results. I always consider this when deciding whether a study is worth showing.
Many times I will also specifically look at behavior in like market environments to reduce the long-term bullish bias. This is why I tried a 200-day moving average filter as well as a 50-day low filter in this particular study.
Rob
rob ,
ReplyDeleteDo you ever use futures ? Or do you just use the deep call option strategies ? And if you have used them why in those instances did you use them over options ? Thanks