Tuesday, January 5, 2016
CPC and CPCE Put/Call Ratios Daily Charts
The low put/calls were highlighted a couple days ago (red circle) so a market top was expected and occurs. Traders are complacent when they load up on calls and laugh at any dolt buying puts; this sends the ratio's lower (the calls are in the denominator of the ratio so as they increase they send the ratio lower). Of course, when all traders are on one side of the boat, in this case on the long side drinking the Fed wine, very complacent, care free and without fear, whammo, they are punched in the face.
S&P futures point to a lower open for Tuesday morning, 1/5/16. The CPC and CPCE put/calls are 1.08 and 0.80, respectively, not quite at the fear and panic levels that will signal a market bottom. The 0.80 on the CPCE can create a bottom but after a day or three of markets jogging up and down, the downside will likely continue until both charts touch the green lines or at least come very close. Check these charts after the closing bell this evening to see if that is the case, or not. The put/calls can be used as a tool for the days ahead to help identify when the near-term bottom is at hand. 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 7PM EST: The SPX finishes up 4 points to 2017 in very choppy sideways trading today. The CPC and CPCE put/calls actually print lower numbers indicating that traders remain complacent and not worried about a market selloff so lower numbers in stocks remain likely. Perhaps SPX price wants to drift higher to 2025-2040 on Wednesday or Thursday, then back down again to 1990-2000 due to the put/calls. If stocks flush lower on Wednesday instead, that may cause the put/calls to spike higher and place the firm near-term bottom for the stock market.