SPY Put-Call Ratio Crashes to 1.51

The SPY Put-Call Ratio Crashed to 1.51 on Friday

The SPY Put-Call Ratio Crashed to 1.51 on Friday

The SPY put-call ratio crashed to 1.51 today, well below its 20 dma, on a strong rise in open interest.

SPY put volume fell by 18%.  SPY call volume rose by 92%.

The CPCE joined the SPY put-call ratio in a sizable drop.  Meanwhile, the CPCI (smart money) surged to 1.54 at its top Bollinger Band.  Recent dates when the CPCI reached this level and its top Bollinger Band include August 4 (before three days’ lower lows) and July 24, the high before the correction into the August 7 low.

All of this together would usually be short-term bearish.  It’s supportive of a downward breakout from the purple megaphone to the bottom of the red megaphone.  The price must then retrace to at least the red megaphone VWAP at SPY 196.45ish, but one more new all-time high before a correction to at least ES 1924/SPY 192.90ish still has higher odds.

 

Possible Rising Megaphone Top

Possible Rising Wedge (Megaphone) Across Purple Megaphone VWAP

Possible Rising Wedge (Blue Rising Megaphone) Across Purple Megaphone VWAP

ES has put in a rising megaphone (blue) across its purple megaphone VWAP. Note how this short squeeze after the dip has stopped precisely on the retest of the rising wedge bottom.

ES is now legal for a downward breakout through its purple megaphone bottom.  But it’s best to short on the actual breakout, as ES could still go for the purple megaphone top.  (Not likely, but could.)

First stop after a downward breakout from the purple megaphone would be the red megaphone bottom. (The current bottom as shown is a guide.  ES will definitely not make it that far.  It must take out the previous red megaphone low.  After that, wherever it stops you redraw the bottom.)

Then ES must retrace to at least the red megaphone VWAP, and will likely go for the red megaphone top. (It would likely redraw that top by taking out the current high but not traveling much farther than that.)

Trading Notes

This wave down will need a retrace to at least the orange megaphone VWAP at roughly ES 1996.25/SPY 200ish, and it could go past the ES overnight high to the ES 2005-2007 area/SPY 201-201.20ish.

Most likely it will form another interior megaphone at that VWAP and put off further decisions to next week.

Short-Term Liquidity Crunch vs. Crazy SPY Put-Call Ratio

ES is Still Working on Orange Interior Megaphone

ES is Still Working on Orange Interior Megaphone

Just let it work until something becomes clear.

The purple scenario would probably actually look more like a head and shoulders with a neckline at the purple megaphone VWAP. The green scenario would retrace to the middle of the orange megaphone before breaking out downwards from the purple megaphone. (It’s early here.)

I wouldn’t be surprised to see the orange megaphone start spinning an interior megaphone at VWAP.