Panic index approaches year-low, options market suggests a rise in US stocks?
The fear index (VIX) continues to hover around 14.0 or below, nearing its yearly low. Therefore, it is showing a downward trend, which is favorable for the stock market.
Investors are currently facing a decision regarding the direction of the US stock market. In addition to fundamentals and candlestick charts, investors can gain some insights from other markets.
Options Market Signals for Buying
Earlier this week, the pure put/call ratio for stocks seemed to be rising, which could trigger a buying signal.
However, this did not happen. On September 13th, there was a large volume of put options buying, and both ratios reached new relative highs on the chart, indicating a intact selling signal.
On September 13th, both the put/call ratio and the CBOE pure stock put/call ratio were greater than 1.0, which is unusual and indicates an oversold condition that can lead to a very short-term rebound.
If the CBOE pure stock put/call ratio exceeds 1.0 again in the next four trading days, it will be a stronger medium-term buying signal.
Fear Index Approaching Yearly Low
The fear index (VIX) continues to hover around 14.0 or below, approaching the yearly low. Therefore, it is trending downward, which is favorable for the stock market.
The "peak" buying signal in early August has "expired" (buying signals expire after 22 trading days). However, the trend for the volatility index buying signal remains unchanged.
These conditions will only change when the VIX rises above the 200-day moving average, which is currently slightly above 18 and slowly declining.
