This chart is the total put call ratio on an 8 day exponential moving average. We use the bollinger band to find extremes moves in sentiment. As you can see this works better on the upside moves. Option sentiment has recently been wildly bearish, which is bullish for the markets. This shows last week's fear reached levels of market bottoms. This suggests we are starting a strong advance. We were pretty surprised to see this and we even had the same mind set as the bears last week. However, this data can't be ignored.
As you can see each time the total put call ratio reaches the upper bollinger band, we rally from around those levels. We searched back to 2004 and found no occurrence where that didn't happen. Perhaps there is an alternate explanation. We'd love to hear your thoughts!
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