The Equity Put Call Ratio is rising which means put buying is outpacing call buying. Put hedging often happens before a market pullback on the S&P 100.

Equity Put Call Ratio

Equity Put Call Ratio chart shows level of put buying is rising.

The put call ratio has risen to its highest level since late August. The rising put level relative to calls means that investors are buying insurance against a market pullback.

If you are not very familiar with calls and puts, please review this lesson on options trading here.

I think the failure of Republicans to repeal and replace the Affordable Care Act today may be contributing to the elevated level of put buying. It sends the message that Republicans are having trouble getting their main issues passed that they promised the American people.

The biggest contributor to the downward move was Yellen’s comments today where she said:

My colleagues and I may have misjudged the strength of the labor market, the degree to which longer-run inflation expectations are consistent with our inflation objective, or even the fundamental forces driving inflation… downward pressures on inflation could prove to be unexpectedly persistent… would naturally result in a policy path that is somewhat easier than that now anticipated.

That’s pretty shocking to hear Janet Yellen finally admitting that the Federal Reserve may have gotten their inflation outlook wrong and may have raised rates too fast.

Fox Business covered the story today:

Source: Fox Business YouTube