Has the US stock market reached peak fear?

Please see below the latest ‘Chart of the Week’ from State Street Global Markets

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This week, Noel Dixon, macro strategist at State Street Global Markets looks at whether the US stock market has reached its peak fear based on the latest reading of the Chicago Board Options Exchange’s (CBOE) put/call ratio. 

“Three weeks ago the CBOE Put/Call ratio* hit its highest point since 2008, after which it steeply dropped by 47%. Whilst this indicator shows an extreme inflection point, bearish momentum is historically followed by market sentiment returning to normal. Interestingly, at around the same time, the S&P 500 also reached an intraday low of 2,191, as global  coronavirus cases continued to rise and uncertainty remained elevated. As such, this chart would imply that “selling fatigue” may have set in and the worst of the deleveraging may have now taken place. With this in mind, it could mean that stock markets avoid a retest of the lows on the S&P 500.”

Has peak fear in the US stock market been reached?

*An indicator that looks at the relationship between the number of puts that traders have purchased on stocks compared to the number of calls traders have purchased. It divides the number of puts purchased by the number of calls purchased.

Source: Bloomberg, State Street Global Markets, Bloomberg

 

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