Friday, May 18, 2012

CPC Put/Call Ratio Daily Chart

The CPC is showing fear so a market rally should occur.  For the last few months we watched the rolling top occur in the markets identified by the red box where trader compacency ruled the roost. January thru April traders were either flat-out bullish, or they would wax worry on television, only to be buying when the camera's were off. The wine was flowing like water and everyone was uber bullish not worried about markets going down at all, complete fearlessness.  As always happens, the markets spank you the other way so as to hurt the maximum amount of traders and this is manifesting in the May selloff ongoing.

The green boxes show where the complacency turns to fear above 1.2.  The December rally that started the long market bull run occurred from 1.26 when fear was strong in the markets.  Thus, now at 1.45, markets need to see a rally since the fear has finally returned for the majority of traders.  The stochastics and ROC are negatively diverged and want to see a smack down in the CPC now which will correlate to the markets bouncing. Note, however, that the RSI, MACD and MACD histogram are long and strong and want to see a matching or higher high in CPC after a pull back occurs.

The elevated anxiety is also proven by the CPC moving above the 1.10 level that held all year long.  Also, the 20-day MA is above the 50-day MA so fear is starting to run strong in the markets. Any trader that placed longs during the carnage yesterday has a smile today since the CPC shows that a rally is likely. This information is for educational and entertainment pruposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.
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3 comments:

  1. MCAPMay 18, 2012 at 9:29 AM

    "Note, however, that the RSI, MACD and MACD histogram are long and strong and want to see a matching or higher high in CPC after a pull back occurs." Please elaborate on the CPC higher high if you could...

    I don't know about smile I have 5 contracts long E-Mini's at 1306.25 last night they printed under 1293 good think I was asleep. Everything looked really good yesterday at 3:30 but if you can count one thing and that is there is always one more fake out break down maximum is relatively always exerted.

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  2. MCAPMay 18, 2012 at 10:05 AM

    biding shares of zynga at 8.09

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  3. Keystone SpeculatorMay 18, 2012 at 10:25 AM

    Hello MCAP, for CPC, the stochastics and ROC show negative divergence that want the spank down to occur now. The other three indicators simply indicate that after the pull back occurs the CPC will come back up again. If all indicators were negatively diverged this would be a significant market bottom area but the indicators show it is not.

    Aside from those tools, in general, the 0.7's are complacency while the 1.2+ numbers signal bottoming in markets so it is prudent to have longs in the portfolio at this juncture.

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