EB Daily Market Report - Special Report - Tuesday, May 10, 2022

Tom Bowley - May 10, 2022

This Special Report is in lieu of today's EB Daily Market Report.

Any time I see potentially significant short-term market developments that I don't believe can wait for an entire report to be written, I want to get this information in your hands as quickly as possible.

There are two developments that I want to make you aware of:

Equity Only Put Call Ratio

I am following the equity only put call ratio at www.cboe.com very, very closely, looking for possible capitulation in terms of bearish sentiment. While it's always possible to see even further bearish sentiment, I do want to point out the following table from cboe.com:

You can see that the total equity puts is very close to the total equity calls. Just at a glance, I can estimate the equity put to call ratio to be around .95. In the half hour that ended 11:30 ET, the half hour equity only put call ratio was 1.41, an extreme reading. Here's my Excel spreadsheet that breaks down today's readings by each half hour (as well as cumulatively):

This doesn't guarantee us an immediate reversal, but does suggest that bearish sentiment is increasing rapidly and that could mark a very important short-term bottom. We'll see.

Rotation to NASDAQ Stocks

Throughout this downtrend, we've seen NASDAQ stocks underperform the benchmark S&P 500. That has changed today, indicating that, at least on a very short-term basis, Wall Street is willing to take on more risk with NASDAQ shares. Here's the chart:

I like this development from a short-term bullish perspective.

Also, tomorrow morning we'll get the latest CPI data. I believe it'll show that the annual rate of inflation is dropping, which could buoy NASDAQ stocks even further.

I have taken a more aggressive position, primarily in the "juiced" NASDAQ 100 ETF, the QLD.

Just wanted to share this information with you. I don't know how the stock market will trade based on all of this, but I believe the odds are beginning to favor the bulls in the near-term.

Happy trading!

Tom