When Will The “Jaws” Close?

The divergence or “jaws” between the S&P 500 and the 10-day moving average of the put/call ratio is at its widest in over 5 years. Far wider than the next biggest gap that preceded the market crash of 2020.

These “jaws” typically resolve with a sharp market decline. The alternative is a wave of put option buying in the absence of a market decline, which seems very unlikely.

We believe global capital markets are at an important inflexion point that will produce both significant risks and opportunities. We discuss these at length in the recently published January issue.

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