{"id":21246,"date":"2023-09-29T07:30:55","date_gmt":"2023-09-29T11:30:55","guid":{"rendered":"https:\/\/www.jeffclarktrader.com\/?p=21246"},"modified":"2023-09-29T07:30:55","modified_gmt":"2023-09-29T11:30:55","slug":"despite-a-bearish-market-heres-why-i-see-a-bounce-coming","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/despite-a-bearish-market-heres-why-i-see-a-bounce-coming\/","title":{"rendered":"Despite a Bearish Market, Here\u2019s Why I See a Bounce Coming"},"content":{"rendered":"<p>It seems like just about everyone is looking for stocks to crash.<\/p>\n<p>The financial television talking heads &ndash; the greatest influence on retail investors &ndash; are leaning bearish.<\/p>\n<p>Clearly, it&rsquo;s having an effect&#8230; Investor sentiment surveys are reporting <em>far more<\/em> bears than bulls.<\/p>\n<p>That means right now, traders are jumping over each other to buy put options.<\/p>\n<p>Take a look at this chart of the Chicago Board Options Exchange (CBOE) options total put\/call ratio (CPC).<\/p>\n<p><!--IMG SNIP--><\/p>\n<p style=\"margin-bottom: 20px\" align=\"center\"><img decoding=\"async\" class=\"img-fluid\" alt=\"Image\" src=\"https:\/\/cdn.jeffclarktrader.com\/JMU\/images\/202309\/20230929-JMU-01_ijr411.png\"><\/p>\n<p>The CPC is a short-term contrary indicator. It compares the volume in&nbsp;call options&nbsp;to the volume in&nbsp;put options.<\/p>\n<ul>\n<li>\n<p>A reading below 0.8 (horizontal red line) shows extreme bullishness. This happens when folks are buying a lot more calls than puts.<\/p>\n<\/li>\n<li>\n<p>A reading above 1.2 (horizontal blue line) shows extreme bearishness as speculators jump over each other to buy puts.<\/p>\n<\/li>\n<\/ul>\n<p>The CPC jumped above 1.2 on Wednesday.<\/p>\n<p>Meaning, as the stock market declined to its lowest level in nearly four months, traders were buying put options and betting on even more downside to come.<\/p>\n<p><!--GREY BOX START--><\/p>\n<div class=\"card bg-light mb-4\">\n<div class=\"card-body\">\n<p align=\"center\" style=\"font-size: 18px;\"><strong>Free Trading Resources<\/strong><\/p>\n<p>Have you checked out Jeff&#8217;s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just <a href=\"https:\/\/www.jeffclarktrader.com\/\" target=\"_blank\" rel=\"noopener\">click here<\/a> to check it out.<\/p>\n<\/p><\/div>\n<\/div>\n<p><!--GREY BOX END--><\/p>\n<p>But, as <a href=\"https:\/\/www.jeffclarktrader.com\/market-minute\/a-september-warning\/\" target=\"_blank\" rel=\"noopener\">we pointed out earlier this month<\/a> when the CPC spiked above 1.2, the market typically doesn&rsquo;t reward the popular trade in the short term.<\/p>\n<p>In fact, the CPC has spiked above 1.2 three other times over the past six weeks. That surprised investors who expected a further drop.<\/p>\n<p>Here&rsquo;s a close-up view showing how the S&amp;P 500 behaved following each of those times.<\/p>\n<p><!--IMG SNIP--><\/p>\n<p style=\"margin-bottom: 20px\" align=\"center\"><img decoding=\"async\" class=\"img-fluid\" alt=\"Image\" src=\"https:\/\/cdn.jeffclarktrader.com\/JMU\/images\/202309\/20230929-JMU-02_ijr412.png\"><\/p>\n<p>In each case, the stock market rallied almost immediately. The S&amp;P 500 recovered much of what it lost in the decline that led to the spike in put option purchases to begin with.<\/p>\n<p>If the market follows a similar path this time, then stocks should be higher over the next several days.<\/p>\n<p>Add on what we&rsquo;ve seen from the VIX signal (<a href=\"https:\/\/www.jeffclarktrader.com\/market-minute\/why-its-almost-time-to-buy-stocks\/\" target=\"_blank\" rel=\"noopener\">I wrote about that yesterday<\/a>), and there&rsquo;s a lot of potential for a strong short-term bounce to kick off the month of October.<\/p>\n<p>That doesn&rsquo;t mean the intermediate-term decline phase the stock market has been in since late July is over. But so many folks are looking for a crash right now.<\/p>\n<p>Since the stock market rarely rewards the popular trade, we&rsquo;re probably due for a bounce over the next few days.<\/p>\n<p>Best regards and good trading,<\/p>\n<p><img decoding=\"async\" alt=\"Signature\" src=\"https:\/\/files.jeffclarktrader.com\/global\/signatures\/jeff-clark-signature.png\" width=\"200\" style=\"max-width:200px; width:100%;\" \/><\/p>\n<p>Jeff Clark<\/p>\n<p><!-- MAILBAG BEGIN --><\/p>\n<div style=\"padding-top:0px; padding-bottom:0px; margin-bottom:20px; margin-top:0px; border-bottom: 1px solid #CCCCCC\">\n<h2 style=\"color: #000000; font-family: Arial; font-size: 25px; font-weight: bold; letter-spacing: -1px;text-transform:uppercase;\">READER MAILBAG<\/h2>\n<\/div>\n<p>Are you anticipating a bounce? <\/p>\n<p>Let us know your thoughts &ndash; and any questions you have &ndash; at <a href=\"mailto:feedback@jeffclarktrader.com\">feedback@jeffclarktrader.com<\/a>.<\/p>\n<p><!-- MAILBAG END --><\/p>\n","protected":false},"excerpt":{"rendered":"<p>It seems like just about everyone is looking for stocks to crash.<\/p>\n","protected":false},"author":55,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ep_exclude_from_search":false,"service":"","footnotes":""},"categories":[1],"tags":[],"publication":[10],"person":[7],"newsletter-type":[],"ticker":[],"class_list":["post-21246","post","type-post","status-publish","format-standard","hentry","category-market-minute","publication-market-minute","person-jeff-clark"],"acf":[],"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/21246","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/users\/55"}],"replies":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=21246"}],"version-history":[{"count":0,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/21246\/revisions"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=21246"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=21246"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=21246"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=21246"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=21246"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=21246"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=21246"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}