Home » Market Indicators, Most Recent Stories

GOLD PUT/CALL RATIO CONFIRMS BOTTOM IN PRICES

14 February 2010 by Cullen Roche 2 Comments

By Jordan Roy-Byrne, CMT at The Daily Gold:

This post is a sample of our premium work. It comes from today’s premium update.

We track options data (put-call ratios) from the International Securities Exchange. Their options data provides a better contrary indicator than options data from the CBOE. Below is a chart of GDX along with the put-call ratio from the ISE. Rising put-call ratios or spikes tend to provide bullish signals when they occur after a market has been falling. We use this data in conjunction with regular technical analysis. Note that the put-call spikes at the end of October signaled a bottom in GDX. We think the same thing has just happened now.

Disclosures - Unless otherwise noted, authors have no positions in any securities mentioned and readers should never consider this to be investment advice. Always consult your financial advisor before acting on any ideas. Comments Guideline - Readers who denigrate authors or other readers will be banned without warning. This site does not tolerate any sort of reader abuse. The goal of this site is to create an environment that is conducive to learning and better understanding of the monetary system and the investment world. We expect readers to behave maturely and responsibly. We welcome and encourage intense and intelligent discourse, but the site adheres to a strict 1 strike policy. While it is your right to speak freely, it is not your right to behave childishly. Above all else, please enjoy the site. It is intended to be used as an educational tool and we hope the intelligent and mature debate will further that purpose. We hope readers will make an effort to respect that goal. Comments with excessive linking or foul language will be moderated before posting.
Comments
  • jrsun

    Why “Rising put-call ratios or spikes tend to provide bullish signals when they occur after a market has been falling”? Shorts will cover? But that would very short-term.

    02/14/2010 at 8:57 AM
    • Jordan Roy-Byrne, CMT

      Since tracking this data (from the ISE) I have found that rising put/call ratios provide better buy signals when a market is correcting or a few days past a bottom. It just doesn’t provide strong buy signals when you see rising put-call ratios in the middle of a strong trend. Technicals work best then…..but when a market is correcting, best to use technicals and sentiment indicators. Hope this helps.

      02/16/2010 at 7:39 AM