2 MORE Signs of an Epic Financial Complacency
Here’s what the put/call ratio reveals about investor sentiment
by Bob Stokes
Updated: December 27, 2019
As we approach the end of 2019, the longest bull market in history is still in place (started March 2009).
Moreover (CNBC, Dec. 19):
For the first time ever, the U.S. economy started and ended an entire decade without entering a recession.
Topping it all off, many investors are as snug as a bug in a rug when it comes to the stock market.
For example, as we recently noted in these pages, one high-ranking bank economist suggested that stock investors should "back up the truck and buy, buy, buy."
Now, let's mention two more signs of an epic financial complacency.
The first sign was discussed in our Dec. 18 U.S. Short Term Update:
The chart (courtesy of SentimentTrader.com) shows the daily CBOE Total Put/Call Ratio under the Dow Jones Industrial Average. The put/call ratio divides the total volume of puts (option bets against rising equity prices) purchased on individual equities and indices on the Chicago Board of Options Exchange by total volume of calls (bullish bets). When the ratio is low it means the bulls are dominating the speculation in options. Yesterday's reading was .63, the lowest in three years. As the red line on the chart shows, it is even lower than the last extreme on the chart, a .64 reading on January 23, 2018.
The second sign of a significant financial complacency was the focus of a Dec. 24 Wall Street Journal article:
Buyers Return to Riskiest Junk Bonds
Prudent investors usually steer clear of the debt of companies with the weakest balance sheets. So, when such debt is enthusiastically embraced, it's a major sign of financial complacency.
"OK -- investors are complacent -- so what?", you may ask.
Well, financial history shows that periods of extreme financial complacency are followed by extreme volatility.
Right now, EWI's analysts are telling subscribers exactly what signs should tell them that volatility is about to begin.
Find out how to get instant and risk-free access to our analysts' insights by looking below this video.
Start 2020 With a Team of Elliott Wave Experts on YOUR Side
You might be one of those rare investors who is fully equipped to navigate financial markets alone.
Then again, you may find that our deep bench of experienced Elliott wave analysts will prove highly useful to you.
Consider this quote from the Wall Street classic, Elliott Wave Principle: Key to Market Behavior, by Frost & Prechter:
Without Elliott, there appear to be an infinite number of possibilities for market action. What the Wave Principle provides is a means of first limiting the possibilities and then ordering the relative probabilities of possible future market paths... the probability that a turning point is at hand can suddenly and excitingly rise to nearly 100%. It is a thrilling experience to pinpoint a turn...
Do yourself a favor: "Be there" when our analysts pinpoint the next critical turns in major financial markets.
Follow the link below to get started with EWI's risk-free offer...
Sometimes a simple Elliott wave chart shows you at a glance why a market is near a major reversal. Such is the case right now with the U.S. dollar. Watch our Currency Pro Service editor explain -- and discover what you get during our Forex and Metals FreeWeek (August 12-19).
History shows at least two examples when the 30 stocks that make up the DJIA failed to match the record highs of the tech sector. Are we living through a third such instance -- and if so, what does it say about the stock markets next move? Our Global Market Strategist explains.
Remember “Seinfeld”? The happy-go-lucky show dominated TV prime time during the booming 1990s. Then the internet bubble burst and we got “Survivor.” You’ll find a similar connection between stocks and movies -- our August Financial Forecast explains.