Tuesday, August 25, 2015

CPC Put/Call Ratio

The CPC up at 1.70 shows rampant panic and fear in the stock market identifying the time for a rally. Right when everyone is wringing their hands and jumping from windows, hopefully first-floor windows, is when markets reverse to the upside. And stocks reversed to the upside this morning rocket launching at the opening bell, however, during the last hour of trading everything fell apart and US equities end the day negative.

The prior market bottoms are shown by the green circles. When the CPC  moves above 1.20 that is when you can nibble on longs and get ready for a rally. The 1.70 is very high panic and fear so a rally would be expected. The selloff late in the day is odd and difficult to explain. Perhaps traders want to see how the Shanghai Index, SSEC, trades tonight.

Stocks should rally until the CPC drops to the red circle area where complacency and lack of fear will rear its head and market topping behavior. Thus, current thinking is that the selloff late day today is a fluke and markets should rally perhaps a repeat of this morning's rally. If the stock market continues to flush lower, the CPC will only spike higher again and continue to set up for a relief rally so there would be no need to exit new longs and instead more longs could be added for the pending rally. Equities should rally until the CPC at least drops under 0.90-1.00 and probably lower. 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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