Pessimism towards stocks is rapidly approaching bearish concentration. Those that follow the money, thus, ignoring the herd recognize this bullish message by reading the tape and invisible hand. These messages trump surveys, polls, and all expert analysis.
The rising put/call ratio, a ratio of premiums paid for puts versus calls, screams growing pessimism towards stocks. For example, the bearish bandwagon, driven by the herd reacting to those within it, is 'full' when the smoothed ratio (white line) climbs above the dark green line. This is highlighted by the purple boxes in chart 1 and 2. This rare technical setup, one that preceded an unexpected trend reversal in the summer of 2013 (chart 2) and most investors ignored, increases the probability of similar outcome in 2014.
Insight subscribers reading the action of the invisible hand through COT volatility analysis easily recognize this setup. This analysis is embedded in the equity charts of the COT Matrix page.
