We posted below on Thurs 20 June and it is interesting that the S&P made a low of 1560 just two trading days later and has now rallied back towards 1700. This is a prime example of how our Titan Macro fund operates – taking a contrarian stance, backed by solid historical analyses at an appropriate risk/reward point.
Thurs 20 Jun –
The US options market has just printed an extreme figure of 1.38 on the Equity only Put:Call ratio (see below highlighted in red – You simply divide the Put figure by the Call figure to calculate). Volume is exceptionally high too in the option and the futures market – in fact the highest in 20 months – that’s a bull sign.
Now, take a look at the chart below and see just how off the richter this measure is – the previous high was actually 1.10 during the summer of the Eurocrisis as the chart below shows clearly (note – it is a weekly chart with a candlestick showing the range). It is noteworthy that even in the aftermath of the Lehman’s crisis, that the high was only 1.16 – below that seen today. That implies the “market” is more fearful today of what’s coming round the corner than in the days after the Lehman crisis… The average is generally arounf 0.5-0.6.
Even though the VIX is not at super elevated levels (currently at 21), the Put:Call figure signify’s that there is most definitely a lot of fear out there. Fear is good as fear is to be bought (and greed sold). With the hourly technicals also showing extreme oversold measures too, our money’s on a bounce in the very near term in the US and, by default, Europe – Spain and the UK being the likely outperformers.
We’re not saying the rally starts right here and now, just that it might be an idea to look for an opportunity on any further lurch lower to buy it hard as “Mr Market” flushes out the rest of the longs. In particular, it seems to work a treat when married with the 1,2 & 4 hourly stochastics being oversold for several hours (like now) a 2hr RSI measure less than 20 and a deviation from the 3 period ema 4hr moving average of around 2%. All these are lining up. A third day lower tomorrow and another extreme print on the Put:call and we’ll have our hands wide open...
The actual day of the 1.16 print was June 15 – and the market bottomed the following day and then never looked back, rallying almost 10% in 2 weeks…
Be vigiliant and keep margin free to take advantage of others forced selling. There are generational bargains out there in the mining sector in particular, and we have continued to purchase selected plays in our Titan funds in recent days. If you’d like more details on these then click the link below to visit out sister company’s website.