In the era of ultra-low put/call ratios and an apparent lack of need for portfolio hedging due to the indefatigable equity uptrend, it has become unusual to see the index put/call ratio spike above 1.50. Today the index put/call ratio closed above 1.50 for the first time since April 1st:

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Index_put_call_7.24.2014

It just so happens that the index put/call spike on April 1st preceded a roughly 4% pullback for the S&P 500

The index put/call ratio is especially significant because professional portfolio managers are always using puts on the major equity indices to hedge their equity portfolios. When the index put/call ratio spikes to unusually high levels it means that PMs are concerned that a market correction may be imminent and they are adding an additional layer of hedges in order to cushion themselves against any declines.

Exceptionally high index put/call ratios have proven to be a useful market timing tool over the years with a very high probability of a market decline occurring within two weeks after the index put/call spikes more than 2 standard deviations above its 5-day simple moving average (such as it did today). The smart money is getting worried, are you?