Chart of the Day - Thursday, August 17, 2023

Today’s Chart of the Day was shared by Renaissance Macro Research (@RenMacLLC). The S&P 500 has pulled back -4.76% from its July 31st highs. Leading up to this pullback, the bull camp was getting crowded. Even the loudest bears had thrown in the towel and were suddenly singing a more optimistic tune. It seemed like the only fear among market participants in July was the fear of missing out. However, we're starting to see signs of genuine fear, and that's bullish. Renaissance points out that the Put/Call ratio is spiking as investors look to protect themselves against further downside. It can be challenging to time the market using sentiment, and the Put/Call ratio could spike even higher before stocks rebound. However, this pullback is doing a lot to extinguish the froth and reset sentiment to more sustainable levels.