Wednesday, March 5, 2014

CPCE Put/Call Ratio Daily Chart Signals Significant Market Top

This chart was last explored in December and early January and used as a forecasting tool, along with other charts such as the CPC and SKEW, to signal a market top, which occurred. The CPCE collapses again to an uber low 0.48. There are no bears remaining in the market. There are only bulls and raging bulls. The long side is fully represented with no one seeing any need to buy protection since markets will continue moving higher forever. Of course this is a contrarian signal which says a market top is at hand due to the bullish euphoria, complacency, complete lack of fear and low put/call. Traders were giddy yesterday, like teenage girls at a sleepover, giggling and screaming with each market thrust higher.

The red circles show the market tops, green circles are the bottoms. Note how the bears have been short-changed for months with cheesy market bottoms occurring before the 0.75 and higher will print. The dip-buyers are drunk off the Fed and BOJ wine blindly embracing the long side as if it was a lamppost at 3 AM. Same dealio is ahead as forecasted in late December early January. It is prudent to be out of any long position that you are not willing to hold for a few years time. There may be a bumpy road ahead that may extend for many months.

Keep refining the long shopping list but sit tight. Stocks are not worth buying on the long side until the CPCE moves back above 0.65 at a minimum, and more likely, since a more serious selling event is long overdue, above 0.75-0.80 and higher. Thus, if scaling in long above 0.65, leave at least 3 or 4 entries available since the markets may be selling off more severely day after day until the proper amount of fear and panic registers and that action will ratchet the CPCE to 0.75 and higher. Watch your wallet.

After these low put/call ratios print, it may take a day or two, or a week or two, for the market top to print and the roll over to occur. The top is at hand and would be currently projected to be at SPX 1874-1890. If the bulls continue pushing markets higher with lower volatility and punch up through SPX 1890, the 1920+ print will be likely and this would be the market top. This latter scenario is not expected at this time. If the VIX remains above 14 moving forward, the SPX should place the top at these current levels. 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.

Note Added 3:56 AM on 3/6/14: The CPCE prints even lower at 0.46 further verifying rampant complacency. There are simply no bears remaining in the market. Watch your wallet.

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