Been looking at the SPY put/call ratio lately and trying to understand how it affects overall market movement.
Seen it mentioned in a few trading discussions but not sure how to read it properly. Does a high ratio mean the market is going down or is it more complicated than that?
Wondering if other traders actually use this indicator or if it’s just noise.
That ratio caught me off guard during the March 2022 crash when I ignored it completely.
I was shorting SPY calls while the put/call ratio was hitting 1.4, which should have been my signal to start looking for longs instead.
Lost about 40% of my account that week because I fought against what the ratio was telling me about market sentiment.
SPY put/call ratio above 1.0 indicates fear. Extreme readings (1.3+) may present contrarian opportunities.
• 0.7-1.0: Normal bullish sentiment
• 1.0-1.2: Caution zone
• 1.3+: Likely oversold bounce
Data supports inverse correlation with short-term price moves.
High put/call ratios often indicate market fear but timing can be tricky.
Many traders view it as a contrarian signal rather than just a prediction. The market often reverses when there’s strong sentiment in one direction.
It may work better when used alongside other technical indicators.
When the put/call ratio goes above 1.2, it often indicates a market bottom is near.