Should the market begin to roll over, the put/call ratio could warn beforehand.

In January, just before the major indices took a big dive, the CBOE Put/Call Ratio (CPC) bolted upwards to 1.53. And, in the past two sessions, the put call ratio is on the rise again. For now, traders will want to keep an eye on the 1.30 area… If the put/call ratio hits this level again, selling could quickly ensue.

The put/call ratio can be a leading indicator, as when it drops dramatically, or fires up sky-high, it is a signal that sentiment has eased to buying, or alludes to bears abundant, respectively.

Exit is everything.

2/4/08