For the first time since January 7, 2009, the CBOE Equity-Only Put-call ratio is above 1.00. On Friday (June 10th), nearly 880,000 puts traded, while slightly less than 860,000 calls traded. This is a rare occurrence -- as evidenced by the fact that there hasn't be a daily reading above 1.00 in 29 months.
As is the case with other put-call ratios, this is a contrarian measure. One can usually expect a quick rebound in the stock market, although details of past occurrences vary rather wildly. Usually, its effect wears off as soon as the market -- measured by $SPX, say -- rallies for just one day. Thus, this is not an intermediate-term indicator, but is rather just an indication of a very short-term oversold condition.
For example, that January 2009 occurrence resulted in a rally the next day of only a small amount. The most spectacular instance was October 10, 2008, where $SPX rallied 104 points the next day (of course, a lot of unusual things happened in the fall of 2008).
In the next issue of The Option Strategist , we plan a more extensive review of the past signals from this rare indicator, including the development of a trading system to utilize it.