- S&P 500 looks overdue for a pullback, according to key options market metric.
- The anti-risk Japanese yen would draw bids if stocks drop.
The two-month average of S&P 500’s put-call ratio has jumped to insanely high levels, which in the past, have led to pullbacks and corrections in the stock market, according to sentiment trader and strategist Troy Bombardia,
The put-call ratio refers to the proportion of all the put options or bearish bets and all the call options or bullish bets purchased on any given day, The metric is widely used to gauge investor sentiment.
As of Monday, the S&P 500’s put-call ratio was 0.56. “The last time this happened was before stocks crashed in February 2020,” Bombardia tweeted.
If the historical data related to the put-call ratio is a guide, the JPY crosses may be trading close to topping out. A stock market correction, if any, will likely strengthen the bid tone around the anti-risk Japanese yen, pushing JPY crosses lower.
At press time, USD/JPY is trading largely unchanged on the day at 107.34.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.