Chart of the Day - Thursday, June 4th, 2020

Today’s Chart of the Day was shared on Twitter by Grayson Roze (@GraysonRoze). It's a chart of the S&P 500 over the past three years, along with an inverted  5-day Put/Call Ratio in red. Many technicians are concerned that the market is getting frothy, as reflected by the extremely low Put/Call ratio. It's 5-day moving average is currently at 0.49 - the lowest reading since the market peaked in mid-February. An extremely low reading from this short-term sentiment indicator tells us that market participants are abandoning their protective puts and buying more speculative calls, betting the market will continue higher. As Grayson points out, extreme turning points in the Put/Call ratio often occur just before turning points in the S&P 500. After a historic 40% rally in 50-days, it wouldn't be surprising to see the market pullback and shake out some complacent bulls. As always, this is just one data point to consider within the context of other evidence. Keep an eye on this potential risk in the near-term.