Saturday, April 18, 2015

CPCE Put/Call Ratio Daily Chart

The previous CPCE chart signaled a market top coming in a few days. As always, each one is a little different. The low 4/6/15 print at 0.50 signaled uber complacency and traders buying stocks on the long side without any fear or worry. Stocks sold off from SPX 2090 to 2075 intraday but if you blinked you missed it. Stocks then traveled higher continuing to place the near-term top required by the low put/call number. The CPCE only moves moderately higher at that 0.60-ish area then comes back down for another uber low reading at 0.55. With this low reading the prior chart and analysis can simply be repeated. The uber complacency signals a top occurring any day forward and in three days the top was in. 

The SPX peaks at 2110-ish and drops to 2072 during the back-half of last week; 38 handles. Okay, big deal, what next? The CPCE is up to 0.74 not yet at the 0.80 and higher level where the near term stock market bottoms have printed recently (green circles). Thus, the expectation is further selling until the negativity and fear reaches a point where a firm near-term bottom can occur (CPCE above 0.80). The prior TRIN chart spiked to a huge 4.00 which says a relief rally should occur quickly. Thus, taking the two tools (TRIN and CPCE) and combining them, markets may rally early to middle next week, to bring the TRIN back down from its loftiness, this would be in concert with the CPCE dropping back down to say 0.65 in another zig-zag move. Then the expectation would be for market selling to reinitiate and continue until the fear and panic is firmly displayed above CPCE 0.80 and higher (which will identify a market bottom).

Bring up the CPC put/call chart and you will see its uber low print under 0.80 on 4/15/15 which signaled excessive trader complacency and marked the exact top in the stock market on 4/15/15. The CPC is up to 1.12 and typically a 1.20 or higher is needed to signal excessive bearishness and identify a near-term market bottom; very similar to the CPCE set-up explained above. The stock market may need to drift lower over the next week or two (after a quickie rally due to the high TRIN) until the CPC moves above 1.20 to signal a firm stock market bottom. If the CPCE prints above 0.80 and CPC above 1.20 on Monday or any day forward you will know a firm rally is at hand and set to begin or already started. 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 8:15 PM on Monday evening, 4/20/15: The relief rally desired by the uber high TRIN occurs right away today, Monday, 4/20/15, with stocks recovering most of Friday's losses. Interestingly, the CPC and CPCE put/call ratios plummet and are signaling complacency again. CPC is 0.79. The CPCE drops to 0.56. Markets are preparing to print another near-term top any day forward. The markets continue the choppy sideways behavior this year.

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