CPC Put/Call Ratio Daily Chart

Keystone shows this chart often which serves as a fear gauge. The red lines show the top in the markets as Keystone described this year.  The red box shows uber complacency, the wine was flowing like water, the bulls were smoking big cigars with their feet on the desk, markets never go down, right? Of course, wrong. The markets peaked and rolled over in April. Note that the bulls maintained a steady fearless reading staying under 1.10 for the first four months of the year.

Once the fear increases, and traders start buying more puts, the ratio moves higher. When the CPC moves over 1.20 the short traders must brace themselves for the start of a market rally. The green circles show the recent market bottoms. Thus, at 1.15, the CPC is only a hair away from 1.20 where a firm rally move can be signaled. Note the converse behavior ongoing now with the bears maintaining a firm 0.95 or higher reading keeping the fear and nervousness elevated. The futures are slightly higher right now which hints at a market up move but the CPC does not agree; it wants to see more fear, and for the price to move above 1.20, and then it will be agreeable to see a market rally.

Projection is for markets to weaken until the CPC prints above 1.20 which will signal time for a relief rally. In an ideal world, markets would be weak today to milk the short side, perhaps receiving a slap down at 10 AM EST on the Consumer Confidence release, then, once the CPC jumps above 1.20, the shorts can be ditched, longs placed, and a rally will appear that will receive fuel from window dressing this week and perhaps some happy Euro Summit news as the week moves along. This information is for educational and entertainment purposes only. Do not invest based on anything you read here. Consult your financial advisor before making any investment decision.