Really pressed for time today, but have noticed over the past few days a very unusual event in the OEX options open interest numbers. Typically, the put open interest is always larger than the OEX call open interest (OI), often the put OI is double the call OI.
Starting early last week, a significant jump in the OEX call OI commenced and Friday's call OI exceeded the OEX put OI for the first time since late December 2005, when the call OI exceeded the put OI for one day (1.02).
So what's the big deal? Friday's OEX call-put OI ratio was 1.03, the highest ratio since March 11, 2003. Prior to the December 2005 one day ratio greater than 1.00, we have to go back to mid-August 2004 where there we two consecutive days of an OEX OI call-put ratio greater than 1.00. If one thinks back to the price action of the aforementioned dates, those time frames accompanied important price bottoms.
I have studied the OI data for several index options series and have found the Q4 and OEX are the two indices whose OI data has some value in future price predictions. This current OEX OI configuration has a good history of telegraphing higher prices ahead. The below chart illustrates the 5 day MA for the OEX OI call-put ratio since the beginning of 2003.
There are several other sentiment related indicators that are in bullish configurations, particularly considering the price action over the past several weeks, but one that I feel has been very interesting is the asset flows of the four largest paired bull-bear funds traded at Rydex. Below is the current fund price-adjusted Rydex bull-bear fund asset ratios of the four largest pairs.
This ratio indicator's 5 day EMA is at its lowest level since the inception of these fund pairs... talk about skepticism in this market by the Rydex traders... astounding IMHO.
Of course, sentiment can turn on a dime, or these indicators can become far more extreme, but to these old eyes, this behavior is simply amazing considering what prices have achieved over the past few weeks.
PS to Geo (if you see this): just saw your $-adjusted Dow comments in another thread, and will try to find time this weekend to update a past study on the topic.