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Monday, December 24, 2007

Weekly CBOE Put/Call Ratio Turns Bullish -- A Tradeable Rally?

Per Barron's Market Laboratory - Indicators (12/24/07), the weekly put/call ratio has turned bullish, especially for equity options.

"Investors rely on the equity put-call ratio, which tends to track individual trades, and the index put-call ratio, which reflects professional and institutional strategies, as contrary sentiment indicators. The higher the put trading, the more bullish the indication and vice-versa..."

"Readings in the CBOE equity put-call ratio of 60:100 and in the S&P 100 of 125:100 are considered bullish...Bearish signals flash when the equity put-call level reaches the vicinity of about 30:100 and the index ratio hits 75:100."

MrKen notes that the equity put-call ratio was .84 for the week ended 12/14/07, the highest since a reading of .91 for the week ended August 17--which preceded a rally of @ 1000 points in the Dow-Jones Industrial Average. The S&P 100 Index (OEX) ratio was at 1.26, a mildly bullish reading--but far off its levels of 1.65 for the week ended 8/24/07 and 1.88 for the week ended 10/12/07.

In addition, the AAII Index (American Association of individual investors) for last week was 35.9% Bullish & 47.2% Bearish--another contrary indicator giving off a short-term 'buy' reading.

So, it looks like Santa Claus may show up on Wall Street in the 'Nick' of time, after all!

Disclaimer: MrKen is NOT a registered Investment Advisor & NONE of the above should be taken as investment advice. It is the writer's Personal opinion ONLY, except where specific cites are given. MrKen has no market positions at the time of this post.

To view this week's Barron's for free, follow this link (MrKen has no connection to Barron's, except as a devoted reader for over 40 years):

http://online.barrons.com/this_week

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