In August we shared this chart indicating that the overbought sentiment condition of option traders meant that prices were due for a correction. The heavy Call option buying was a sign that sideline cash for purchasing stock was used up and pessimistic put buying extremes would be typical prior to a new leg up in stocks. In early November the oversold extreme was finally reached and prices can now continue higher. Investors should move from 90% to 95% invested basis the SPY (S&P 500 Index ETF).
