Friday, February 6, 2009
Signals not to be ignored
I am short. I am heavily short. Today was not a banner day. Am I worried? Absolutely not.
One chart, one message. Keeping things simple. When sentiment swings too far one way, it swings back. Not always at the exact time you think it will, of course. But things are rarely "different this time."
The total options put-to-call ratio chart shows that people are betting more long and less short than they have in over a year!
For those who say "who cares?" I say: spook the previous barbecue signals, yo:
The Volatility Index ($VIX) during these cha-ching times also fired up the options premiums:
So, yes, this time it could be different. That's why traders have to be flexible. But betting that this time will be different is more reckless than betting on human folly repeating all over again.