As the Dow Industrials shift into hyperdrive, a sense of agita is rising rapidly on Wall Street.
A number of analysts and strategists over the past few days are cautioning that worrisome trends are starting to crop up as equities take the escalator higher, pointing to a market that is getting overheated.
Even those who don’t see a seismic move down anticipate that a pivot lower is appropriate.
Asbury Research’s chief market strategist, John Kosar on Wednesday said although he isn’t seeing a long-term pullback in the cards for equities, he says the market is due for a retreat.
Kosar cites the VIX and the Chicago Board Options Exchange put/call ratio, which is a measure of bullish and bearish bets on the market. As the following chart shows, Kosar believes that the 5-day moving average of the put/call ratio is showing signs that market is getting less bearish, which tends to precede a downturn.
Put options give the owner the right to buy a stock at a preset price and time, so they can be used as a form of insurance against a market decline, while calls are typically used to reflect a bullish opinion on a security.
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