More Mixed Signals

I continue to struggle with getting a good read on sentiment. Many of the sentiment indicators I look at are at odds with each other. People tell me that sentiment is giddy. However, my sense is that while short term sentiment is frothy in some quarters, a lot of people are worried about a pullback.

In this post I am going to highlight the put/call ratios for both the CBOE and ISE. Unfortunately, these are also at odds with each other. The chart below is the 10 day moving average of the ISE equity only put/call ratio:

This chart is giving off a buy signal as it seems retail traders are rushing to puts. This is quite difficult for me to believe, but this is what the data is saying. The chart below is the 10 day moving average of the CBOE put/call ratio:

The CBOE put/call ratios is much closer to giving off a sell signal and is in the danger zone. These are yet another pair of sentiment indicators giving off conflicting signals. At every top and bottom one can find sentiment indicators that don't confirm but they are generally in synch. The amount of conflicting sentiment indicators we are seeing is unusual. Given today's spike, the low VIX and enough concerning indicators I will likely purchase some protection today despite my confusion.

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