Wednesday, December 11, 2013

CPC Put/Call Ratio Daily Chart Continues to Signal Significant Market Top

The drama with the low put/call ratio's continues for 7 weeks--very uncharacteristic market behavior. Chalk it up to the Yellen rally, then the non-stop daily Fed pumping with at least 2 or more Fed heads cheer leading the stock market with lip service, and the icing on the cake, the BOJ yelling Banzai as they beat the yen with a baseball bat sending the dollar/yen currency pair higher as well as the Nikkei and U.S. stock markets. The Fed and other central banker actions have destroyed price discovery and that is likely the reason behind all the odd market behavior over the last month or two.

A put/call in the 0.7's and lower verifies the ongoing complacency in the markets. There is no wall of worry that markets are climbing. Instead, markets climb a wall of Fed. The pink box shows this unprecedented extended low behavior; the put/all now under 1.0 since early October! The 5/55 cross (2 Fibonacci numbers) provides insight into broad market direction. In September the low put/call identified the market top and the 5 MA moved above the 55 MA to make for happy bears. The SPX dropped 80 handles in 15 trading days. The high print at 1.30 showed some minor panic and fear entering the markets and the dip-buyers did not need much prodding, so they entered in force creating the October bottom and rally ever since. The 5 MA drops under the 55 MA verifying the broad market rally ahead. A gap-up occurred in the SPX at 1735-ish creating an island above. It is very reasonable to expect a move back to the SPX 1735-ish once the selling kicks in, at a minimum, and this area also corresponds to the September market top.

Over the last couple days note how the 5 MA wanted to move above the 55 MA (red circle) to finally signal the market selling to begin, but, was rejected on this first try. The expectation is for the 5 MA to pierce up through the 55 MA any day forward and the broad market selling will begin. Continue to develop your long shopping list. Throw all longs overboard now that you are not willing to hold for 2 or 3 years time. Wait for the panic and fear to arrive above 1.20 and that is where you can scale-in on the long side buying the stocks on your long shopping list. Watch your wallet since equities should crack at any time 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.

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