Sunday, October 20, 2013
CPC and CPCE Weekly Charts Signal Significant Market Top
The CPC and CPCE put/call ratio's are highlighted in a longer time frame via the weekly charts and the significance of the trader complacency and lack of fear is displayed in its full glory. The CPC is at multi-year lows. There are no bears remaining, zero. Even anyone waxing worry and professing bearishness and caution is actually fully long the market. The put/calls do not lie. They tell you what traders are doing, not what they are saying, thus the bulls are uber bullish these days, and the bears are bullish as well. Everyone is bullish and Ma and Pa just took their entire life savings and placed it into dividend stocks and long indexes, just like all the folks on television told them to. They will have their head handed to them.
Keystone has provided these charts many times over the years. The regular readership knows the red circles are the significant market tops and the green circles are the significant market bottoms. Do you notice a pattern? The market tops were easy enough to call this year, especially using negative divergence, however, the bears have been short-changed every step of the way only managing small pull backs since the Fed and other central bankers continue dropping money from helicopters led by Chairman Bernanke.
Suffice it to say that this market pull back may be the big one, the real deal. The SPX may drop as much as 80 to 150 handles, or more in the coming weeks. All rallies should be shorted moving forward. To paraphrase actress Bette Davis from decades ago, "Fasten your seat belts, it's going to be a bumpy ride." The equity markets will begin selling off within zero to 10 days time and a selloff in excess of -5% is easily on the table, even as much as -20%. Nobody sees this coming.
Make your preparations. Lighten up and exit longs, build a stronger cash position so you can buy in the future when the fear and panic occurs, and bring on downside protection either by shorting stocks or indexes, playing inverse ETF's, buying puts, or many other trading strategies for short-sellers. If you are a trader or investor that only likes to play the long side of the market, simply get yourself into cash exiting the longs, then you can get ready to go long when there is blood in the streets. Assess the portfolio and ask yourself if you are willing to hold the current longs you have for 2 or 3 years, or more. If the answer is yes, you will ride a big sell off downwards but in the coming years will recover. If you are not willing to hold any long position for this time period into the future, throw it overboard this week. Markets will likely top and roll over within the next 10 days. Any market spurt higher in the days ahead is a gift to exit; a pattern of selling all rallies will likely begin and continue for the weeks and months ahead. The current prices in equities may not be seen for years forward. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.