I lately took a look at changes inwards the lay out of shares outstanding of the SPY ETF every minute a thought measure. When traders are bullish, shares are created inwards the ETF; when they are bearish, shares are redeemed. This is a useful thought gauge, because it reflects what traders are truly doing inwards the market, non simply their stated sentiment.
What is interesting is that nosotros convey seen considerable part redemption inwards SPY since the halt of the year. Indeed, shares outstanding are downward on a 5, 10, together with 20-day basis. Since 2012, we’ve had 23 non-overlapping periods of such part redemption. Ten days later, SPY was upward eighteen times, downward five for an average hit of 1.18%, compared alongside an average 10-day hit of .43% for all other occasions during that period.
Although nosotros are non then far from all-time highs inwards SPY together with convey bounced good off recent lows, bearishness on this mensurate continues. Interestingly, the put/call ratio for all listed USA equities has been higher upward .90 for the final 2 trading sessions, also higher upward average.
As noted yesterday, I convey concerns virtually the longer-term blueprint of breadth amidst USA stocks. One argue for tracking dissimilar marketplace measures is that nosotros tin avoid confirmation bias past times observing when things are non lining up. Right now, thought is non lining upward alongside a motion-picture exhibit of a topping market. There are times when flexibility is every minute of import every minute conviction: a big border inwards markets is retaining the pick of non trading together with waiting for clarity earlier placing bets.
Further Reading: Options-Based Sentiment