Wednesday, April 9, 2014
CPCE and CPC Put/Call Ratio's Daily Charts Signal Significant Market Top
The low VIX now at 13.82 and low put/call ratio's verify the ongoing market complacency. Today was comical as sullen-faced traders the day before immediately burst into song and frolic as the Fed handed out more candy this afternoon. The bullish euphoria returns in a wave of glory, as if it had never left. Party hats were passed out and traders were in a drunken stupor sipping wine all day long into the closing bell; then staggering to happy hour with smiles all around. Traders are immediately convinced that the long rally is now back in play and SPX will head above 1900 then 2000 in the near future. As Prince says, they were "partying like its 1999."
You know the drill on the charts above; Keystone has posted them many times. The low put/calls, identifying complacency and complete lack of fear in the markets, signaled the market top at the start of the year. Likewise, the low put/calls signal the top only a week or so ago with the uber low readings. Sure enough, markets flushed to the downside due to the complacency and lack of respect for any possibility of downside occurring. Here we are again at an uber low CPC of 0.61 and CPCE of 0.45 signaling a significant market top at hand. Equities will top at any time, tomorrow, or a few days ahead, but likely within one week or so.
Keep fine tuning the long shopping list. Any long that you are not willing to hold for several years should be thrown overboard. Either cash or short is the play forward. The SPX may float upwards to finish this week on an even higher note but the long five-year plus rally is very long in the tooth and any long position held now is playing with fire. The end is finally here after all these many weeks and months; this may be the multi-year top for the markets hitting any day forward. Make your decisions right away; you do not have any more time.
The next move down which will begin any day forward is likely to be very nasty and not stop until the put/call's see the green circles at the top right of the charts. You can start nibbling on longs from your shopping list when the put/calls move above the thick green lines. The next couple weeks will be interesting; the SPX should print far lower in the days and weeks ahead; the SPX at 1750 in May is not at all unreasonable. 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.