summary
Small investors seem to like what they see and have proven this by relying more heavily on call options versus put options. The CBOE’s five-day equity-only call/call (P/C) ratio fell to 0.51 at the end of September, the lowest reading since July 2023 when it fell to 0.48. That was when the stock market peaked and ended up falling until the end of October. Since the low on September 26, the five-day P/S has risen again to 0.57, which is still a fairly low level. However, the stock’s 21-day P/E ratio is still falling, which is bullish for the stock. Why? Buying heavy calls vs. puts Buying underbid quotes. These P&L rates are low and warn that investors are heavily biased towards the upside of the market, are not concerned about the downside, and are doing some hedging. But generally there is a shift in this action towards more buying before the market declines. So, if the 21-day indicator turns higher, it will be a signal that stocks could be in some pain. We monitor this combination of price-to-earnings ratios closely. While we believe the bull market has room to run, the headlines stink and October could come as a surprise
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