Sunday, February 22, 2015
CPC and CPCE Put/Call Ratios and SPX S&P 500 Daily Charts Signal Market Top At Hand
The CPC and CPCE put/call ratios indicate a significant top at hand (red circles). It should manifest at anytime over the coming days. The low put/calls under the red line indicate rampant trader complacency and no worry or fear that markets will go down. Friday was a euphoric party atmosphere after the Greece bailout deal. The cab driver, Aunt Agnes, Uncle John and all the blue-haired gals from the bingo hall each took their entire life saving and placed it in dividend stocks and AAPL stock last Friday at the peak of the bullishness. Complacency rules the day. No one is worried about the stock market ever going down again since ECB President Draghi fired the QE money bazooka and the obscene Keynesian bond-buying will pump stocks higher.
The market bottoms (green circles) are cheesy over the last few months since traders fully believe in the power of the ECB and fully expect higher stocks in 2015. The CPC should print above 1.20 and CPCE above 0.80 to signify enough panic and fear to begin a recovery rally but recently the bottoms are more shallow since traders are quick to buy as the ECB plans to drop money from helicopters to boost stocks. This behavior illustrates the fluff that is continually being placed underneath the stock market as price continues higher.
If the put/calls drop further, that simply means the market top is coming even faster and you want to place trades on the short side. The previous SPX chart wants another price high and markets are typically bullish for the Fed's Congressional testimony early in the week, so perhaps equities float along sideways to sideways higher into Wednesday and then the boom is lowered with a market selloff after Fed Chair Yellen leaves the building. The expectation is that a market sell off will begin any day ahead but the market top appears to be more likely mid week say Tuesday-Thursday. 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.