Summary
Small investors appear to like what they see and have demonstrated this by leaning heavily on call options versus put options. The five-day CBOE equity-only put/call (P/C) ratio fell to 0.51 at the end of September, the lowest reading since July 2023 when it fell to 0.48. That was just when the stock market was peaking and ended up falling until the end of October. Since the low on September 26, the five-day P/C has climbed back to 0.57, which is still a fairly low level. However, the 21-day equity-only P/C ratio is still falling, which is bullish for stocks. Why? Heavy call buying versus put buying places a bid under prices. These P/Cs are low and warning that investors are leaning very hard on the bullish side of the market, are not worried about the downside, and are doing some hedging. But generally there is a turn in this action toward more put buying before the market falls back. So if the 21-day turns higher, that would be the signal that stocks might well experience some pain. We are watching this combination of P/C ratios very closely. While we think the bull market has room to run, the headlines stink and October can be a
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