Monday December 28, 2009

The spread between calls and puts on the CBOE is how technical analysts judge current sentiment. When the calls start outpacing puts by a wide margin, there's a point when this optimism reverses. We can measure this is the put-call ratio, and we can follow it intraday right at the CBOE website, click here.

Conclusion The Nasdaq, along with other indexes, is getting overbought, evidenced by the RSI touching the 70 mark.That's typically where the markets pulled back. With the Nasdaq on breakout, it would be a likely thing that it would backtest that breakout.
[Click Chart to Enlarge]