Equity Only

I have been complaining about the 10 day moving averages of the put/call ratios and saying they were not likely to reach the type of extreme they saw in January or other major highs until next week. A reader on the message board, CP, posted a chart of the 5 day moving average of the CBOE Equity only that looked pretty extreme.

I don't usually pay much attention to the equity only reading at the CBOE because it usually is inline with the overall reading, which I follow, and is not yet close to an extreme. Upon seeing the chart CP posted I decided to take a look. Below are the 10 Day moving averages of the CBOE and ISE equity only.

The CBOE Equity only is certainly closer to an extreme than the overall CBOE (which I posted 2 days ago) or the ISE Equity Only.

I believe the market is closer to extreme optimism than extreme pessimism.  I also realize that every top looks different and we might not necessarily see the same extremes this time around.

To make things crystal clear I am not bullish and am actually slightly short because I got rid of  Vodafone but did not dispose of the related hedge. I want to see the whites of their eyes before I get short and as a result run the risk of missing the top. However, that same cautiousness has stopped me from getting run over this entire run. Have a great weekend.


PJ said...

You've done very well, Tsachy. Thanks for showing us your thought processes.

Anonymous said...

When you say, "You're not bullish" what is your time frame? The week, month, quarter? The reason I ask is because you're more of a trader than I am and I'm waiting for the market to pull back before I buy more for a longer term hold.

your thoughts on the direction for the next 6-9mo?

Tsachy Mishal said...

Thanks PJ

Tsachy Mishal said...


I think you want to Sell in May and Go Away this year. Comps will be much harder in the second half of the year as we will be comparing to a period of recovery. Right now every number looks magnificent because we are comparing it to the depth of the recession. A lot of the stimulus will be wearing off. Until May we could have more rallies.

Anonymous said...

Those of you looking to buy -

Doesn't it bother you that Lehman and E&Y possibly committed securities fraud while the FRBNY and Treasury knew and looked the other way, as disclosed in the bankruptcy examiner's report?

Does that spell generational buying opportunity, or a financial system that is so sick that major frauds are considered par for the course?

CP said...

Good stuff. This certainly feels like a top, although as Tsachy says it could go higher.

But the patterns really remind me of 2007, where the writing was CLEARLY on the wall all year but the market rallied until October.

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