Bearish options outnumbered bullish bets by the widest margin since the Standard & Poor’s 500 Index made its bottom this year, a sign that U.S. stocks may be due for a rebound, according to Birinyi Associates Inc.
The ratio of puts to calls on U.S. indexes increased to 1.15 on May 17, the highest in two months. Since the S&P 500 began its rally from a 12-year low in March 2009, the options ratio had risen or stayed above that level on five occasions analyzed by Kevin Pleines, an analyst with Westport, Connecticut-based Birinyi, who found that four of those times the market was higher a month later.
The S&P 500 resumed its two-year rally on March 16, when the ratio of puts to calls jumped to 1.17, the highest level since September 2010. The benchmark advanced 5 percent in the following month.
Technical analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.