Tom Lee, founder of US market research firm Fundstrat Managing Partner, said on Wednesday that US stocks showed an extremely rare reverse signal on Tuesday, indicating that US stocks will rise sharply, Zhitong Financial APP has learned. The bearish bullish ratio (Put to Call ratio) surged above 1.0 on Tuesday, he said, while the S & P 500 rose more than 1 per cent on the same day. This signal is puzzling because the bearish and bullish ratio usually soars when the stock market falls rather than rises strongly.

The bearish-bullish ratio is a technical indicator that helps measure investor sentiment. A bearish-bullish ratio of 1 indicates that the market is in a neutral period, while when the bearish-bullish ratio becomes unusually high, it means that a large number of put options are being bought, indicating that the market is likely to be bottoming out. Investors may consider going long on the stock market accordingly.

The bearish-bullish ratio jumped to 1.35 from 0.64 on Tuesday, while the S & P 500 rose nearly 1.4 per cent, Tom Lee said. The bearish-bullish ratio has soared above 1 on the same day that the s & p 500 rose more than 1% since 1997, according to the data. Tom Lee said that in these three cases, "the forward return of the stock is very good". He pointed out that the three events occurred in February 1997, November 2008 and March 2020, respectively, and the stock market rose sharply in the following months and year.

After these three events, the average forward return for the S & P 500 over the next three months, six months and 12 months was 3.7 per cent, 17.5 per cent and 35.8 per cent, respectively, and the chances of a positive forward return over the next six and 12 months were 100 per cent, according to Tom Lee. As a result, this reverse signal, coupled with strong seasonal factors at the end of the year, led Tom Lee to believe that the S & P could soar to 4500 by the end of the year, up about 12 per cent from its current level.