Friday, April 23, 2004

The all-exchange, all-option put/call ratio I mentioned on 4/20 is once again showing an extremely low reading at 0.46.  As near as I can determine, it is not due to an extraordinarily large set of trades in QQQ, which is the usual culprit.  Recall that the reading on 4/20 ocurred before the large draft down that afternoon.  I'm not expecting anything close to the same thing this time, but when considered in conjunction with our other measures, I think it's increasingly less likely we'll see major upside until some of this enthusiasm wears off. 11:06:08 AM

There was surprisingly little movement in the Rydex assets last night considering market performance.  For example, the Titan 500 fund, leveraged 2 to 1 long on the S&P, gained only $8 million and Velocity, leveraged 2 to 1 long on NDX, gained only $2.6 million.  These are very unusual given the size of the rally yesterday.  Over the short-term (3-5 days), this bodes well for the likelihood of more rally. Today's gap open should be viewed with some suspicion, however.  Our shortest-term measures are mostly overbought (see intraday charts) and also of note is that the VIX was extremely close to hitting new lows even while its underlying index, the S&P 500, was 20 points or more from its recent high.  All of this makes me very dubious when we see a large gap up open, and I am inclined to think this gap will be filled sometime today if we open where the futures are indicated now. 8:11:57 AM