One of my favorite contrary indicators is the put to call volume ratio of an individual stock security.  Generally, a relatively high put to call ratio indicates that market participants are, on balance, very afraid of a price drop.  A relatively low put to call ratio means that market participants are overwhelmingly convinced that price is going much higher.

And the way to use this data is to look for extremes in these sentiment readings and know that they are contrary indicators.  That is, when the preponderance of market participants are in strong agreement about market direction, they are about to get the surprise of their lives.  LOL

  
The SPY ETF will serve as our ‘sentiment assessment’ surrogate for the SP-500.  What we note from today’s data is that the put to call ratio is literally lower than any day in the past 12 months.  This means that market participants are more ‘certain’ that the stock market will continue higher than any other day in the past year.

Click on the charts to ENLARGE

The GLD ETF will serve as out ‘sentiment assessment’ surrogate for the precious metal Gold. 

This is a curious situation as the price of Gold has literally gone nowhere in the past 9 weeks.  Yet 9 weeks ago, investor sentiment was extremely bearish with a sky high put to call ratio of 1.30.  

Today we see that sentiment has completely reversed extremities.  Now it is extremely bullish as represented by a low put to call ratio of .80.  Yet the price is virtually the same – $135.

As a contrary indicator, this GLD data, as with SPY, strongly suggests that a correction of significance is coming to both the stock market and Gold – and soon.

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