SPY Put-Call Ratio – Both Bulls and Bears Dig In

The SPY Put-Call Ratio Dropped to Roughly Neutral Today on a Strong Rise in Open Interest

The SPY Put-Call Ratio Dropped to Roughly Neutral Today on a Strong Rise in Open Interest

SPY put and call volume both dropped today, though SPY put volume dropped a lot more–enough to bring the SPY put-call ratio back down from its upper Bollinger Band to its 20 dma.

The drop in the ratio happened on a strong rise in open interest. That means both bulls and bears were digging in today. These are perfect conditions for a triangle or similar consolidation.

SPY Put-Call Ratio Crashes Heading Into Opex Friday

The SPY Put-Call Ratio Crashed Its Bottom Bollinger Band Heading Into Opex Friday

The SPY Put-Call Ratio Crashed Its Bottom Bollinger Band Heading Into Opex Friday

As expected, the SPY put-call ratio crashed its bottom Bollinger Band today. You see this a lot on triple witching Thursdays.

The ratio closed at 0.96.  Heading into opex Friday, a move down in the ratio this strong away from the ratio’s 20 dma would tend to be bearish for the price tomorrow.

SPY put volume rose today by 61% on another strong rise in open interest.  SPY call volume rose by 190%.

The set-up is very similar to other triple witching Thursdays.  On those Thursdays, you tend to see either big moves up within trading ranges or small breakouts to a new high.  These moves trigger a lot of bullish sentiment.  You tend to see a strong rise in both open interest and SPY put and call volume.

But the move tends to be either the top before a significant dip, or it’s a breakout within a megaphone that will lead first to a dip, then a higher high, then a bigger dip, and so on.  When the triple witching Thursday move occurs within a megaphone, it can break out in either direction.

 

 

 

 

SPY Put-Call Ratio Falls Slightly

The SPY Put-Call Ratio Fell Slightly Heading into Triple Witching Thursday

The SPY Put-Call Ratio Fell Slightly Heading into Triple Witching Thursday

The SPY put-call ratio fell from 1.75 to 1.72 today on another good-sized rise in open interest.

SPY put volume rose by 13%. SPY call volume rose by 15%.

The SPY put-call ratio tends to fall to its bottom Bollinger Band on Thursdays of triple witching weeks, and the move tends to occur in the context of a price rally. Then the ratio tends to rise to close to its 20 dma on Friday.

The strongest price rallies tend to occur when the ratio has a longer way to go to its bottom Bollinger Band.  Nevertheless, tomorrow is likely to be a good day to buy the dip for a day.

SPY Put-Call Ratio Falls – Buy the Dip

The SPY Put-Call Ratio Dropped Below its 20 dma on Tuesday

The SPY Put-Call Ratio Dropped Below its 20 dma on Tuesday

The SPY put-call ratio dropped to 1.75 on Tuesday, which is below its 20 dma. This would usually be bearish for the price heading into Wednesday of opex week.

The drop in the ratio happened on a strong rise in open interest.  SPY put volume dropped by a modest 5%. SPY call volume rose by 7%.

One thing to keep in mind is that any dip tomorrow will probably get bought, as this is a triple witching week, and you tend to see melt-downs in the SPY put-call ratio on triple-witching Thursdays. This tends to happen in the context of a price rise.

Since the SPX is unlikely to fall enough tomorrow to reach its target of the March low, it is highly likely to be putting in a triangle here:

SPY Potential Triangle within Orange Falling Megaphone

SPY Potential Triangle within Orange Falling Megaphone

The potential triangle is forming within a potential falling megaphone (orange). The price would often get all the way to and through the orange falling megaphone bottom on its final wave down, but the move down can also peter out in the middle of the formation.

The failed breakout from the SPX ascending triangle gives a standard minimum target of taking out the March low.