The ISE Sentiment Index (ISEE), a creation of the International Securities Exchange Co., is a unique calls/puts ratio that only uses opening long customer transactions to calculate bullish/bearish market direction. Opening long transactions are thought to best represent market sentiment because investors often buy call and put options to express their actual market view of a particular stock. Market maker and firm trades, which are excluded, are not considered representative of true market sentiment due to their specialized nature. As such, the ISEE calculation method filters out a lot of noise and allows for a more accurate measure of true investor sentiment than traditional put/call ratios. The Index has found a good degree of success as a useful contrarian indicator (See links in Resources )
The Chart below shows the ISEE at a 5 years low indicating excessive bearish sentiment that should prove bullish for stocks. Indeed, the Index has reached a level lower than that registered at the 2002-03 market bottom. This Chart provides additional evidence of a stock market bottom at this time and has been added to the update of
The scenario for a possible stock market bottom:1990 recession re-visited again
See also the Chart of the SP500: today vs 1990