Yesterday’s ISEE equities-only closing value of 100 was sufficiently low that only once in the last year has there been a lower number.
Recall that the ISEE is a call to put ratio (or an inverted version of the more common put to call ratio) and that the equities-only variant is probably the best way to tap into the options habits of the retail options trader.
The chart below goes back to February 2009 to highlight, with a green arrow, the only two instances where the ISEE equities-only index closed below 100. Note that both instances occurred just prior to an important bottom.
In the current context, the fact that the low ISEE equities-only number appears just after what I think may be an important bottom raises two distinct possibilities:
- SPX 1040 may not turn out to be a bottom…OR
- SPX 1040 has a very good chance of holding as many investors are still firmly in the bear camp and have yet to come around to the long side
(Click chart to enlarge)