TL;DR: Fear returned to the S&P 500 in a single day: after yesterday’s decline, traders sharply increased downside protection. Historically in this bull market, similar spikes in put buying have more often been a contrarian bullish signal than a warning of a major sell-off.

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🛡 Fear returned to the S&P 500 in just one day.

After yesterday’s market decline, it took only one red session for traders to materially increase demand for protection against further downside.

The CBOE Equity Put/Call Ratio jumped to 0.75, its highest level in two months. This indicator compares trading volume in put options with call options: the higher the ratio, the more actively market participants are hedging against a decline or positioning for further weakness.

Interestingly, during the current bull market, such spikes have tended to work more as a contrarian signal.

According to Bluekurtic Market Insights, since 2023 there have been eight prior instances in which the Put/Call Ratio rose to 0.75 after remaining below that level for at least a month.

Three weeks later, the S&P 500:

- Was higher in all 8 cases
- Delivered an average return of +2.4%
- Delivered a median return of +2.7%

The sample is small, so this is not a decisive forecasting tool. Still, the pattern is notable: during the current bull cycle, a sharp increase in put demand following a modest pullback has more often signaled excessive short-term fear than the beginning of a deeper market decline.