Tuesday, August 12, 2014

CPC Put/Call Ratio Daily Chart Complacency Setting Up Another Market Top

Traders are more complacent now than going back to June despite all the recent negativity and ongoing geopolitical turmoil. Alfred E. Neuman says, "What? Me worry?" The SPX is not near the all-time highs but traders remain enthusiastically bullish since the Fed and other central bankers supply the easy money each day. Fed Chair Yellen continues printing $25 billion per month of QE and the easy money floats into stocks keeping the party alive. There is no reason to worry or show any restraint due to the central banker support that will supposedly continue forever. Trader's are trained like Pavlov's dog to buy stocks each time the easy money bell rings. Rich Uncle Sam is always there to pick you up and dust you off, handing you a bunch of dough so you can buy more stocks.

The red circles show market tops triggered by uber complacency and the green circles are market bottoms as whiffs of fear and worry enter the markets. The low readings in April and May forecasted a significant move off the top and markets fall an initial -5% with many blue chips already down -10% or more in correction territory. Aunt Betty and Uncle Doug followed the advice of the television pundits and placed there entire life savings in dividend stocks and are now eating franks and beans each evening. A 3% divvy is not too attractive since stocks in correction mode will now need three years to catch-up to get back to even.

The 1.20+ number identified the near-term bottom but with such a drastic move back to a worry-free complacent environment, the markets are setting up the next top. The CPC can fall further showing greater complacency which will only guarantee the market top. The 0.70 and lower reading would lock in a top to occur in the days or week or two ahead; the 0.74 number is already low enough to hint that the recovery rally starting Friday likely has limited upside. 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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