WHERE ARE THE SELLERS???

Not here yet, apparently. With the S&P 500 steaming ahead steadily and up 50.8% from its March bottom, it may be time to look out for points of correction to take profits. Based on the Put-Call Ratio chart above, it appears that the S&P 500 may have some way to go before it stumbles across a major correction.

S&P Put-Call Ratio Chart
The Chicago Board Options Exchange (CBOE) tabulates the total volume of puts and call options traded on S&P counters everyday. We have divided the total number of puts by the calls to come up with the chart above. Basically, an upward trending Put-Call (PC) ratio chart signifies bearishness because more people are taking up puts relative to call options and betting that the market will go down.

It can be seen from the chart above that from the year 2003 till 2006, the PC ratio was trending upwards until peaking in early 2007 which was near the peak of the previous bull rally cycle. Now, the PC ratio is apparently trending downwards as the number of sellers in the market decrease relative to the number of buyers who are increasing. This signifies bullishness for the US markets.

Maintain Bullish view on FBM-KLCI
As the correlation of the KLCI with the S&P 500 stands at 93.5%, we opine that the KLCI will follow the S&P’s cue and continually move upwards from here. We will not shift our bullish view until we see a definitive bearish or reversal signal in the PC ratio chart.