Using the CPC for Intraday Timing

Here is an example of how I used the intraday readings of the total put/call ratio to time my entry and exit today.

In the chart below, SPX is represented by 30 minute candles and the CPC (put/call ratio) by the blue line. The cpc values are provided at the end of each half an hour by the CBOE.

My longer term analysis suggested the market could correct today, so the question was where to short. Generally, I believe fading extremes in sentiment offers the best entries, so I thought that extremes in intraday sentiment would be quantified by bigger spikes in the cpc values. I was looking for spikes bigger than 0.1 in the ratio to qualify as extremes.

The first extreme, in bullish sentiment, came at the end of the first hour of trading (second 30 minutes bar). The ratio had spiked from 0.95 to 0.81, so a short entry was granted (in fact I had entered short earlier as the market shot up higher - posted on the blog -, but I was close enough to the ideal case). This short entry is marked by the red circle.

However, after 30 minutes, at 11:00 am, I noticed the ratio had spiked down (on the inverted chart), first green arrow. This qualified as a bearish extreme in sentiment and it was surprising to me because the market had barely dropped. So, I chose to close half of myshort (not posted on the blog), marked by the green circle.

When, at 12:00, despite the rising market the put/call ratio continued lower (on the inverted chart), second green arrow, I decided it was time to close the rest of my position (posted on the blog), second green circle, expecting the market to move higher on the back of the rising bearish sentiment.

At the moment, I am waiting for the next "bullish spike" on which I would try a second short entry for a steep drop into the close.