Sunday, January 31, 2016
CPCE Put/Call Ratio and SPX Daily Charts Signal Near-Term Market Top at Hand
Traders remain relaxed and complacent despite the market turmoil. The CPCE is down at 0.58 where a market top would be expected to occur at anytime any day forward. The CPC put/call ratio is not yet down to a comparable low like the CPCE above so that may hint that a couple more days are needed before the market top is in place.
The saw tooth action over the last two weeks is creating confusion in the numbers. In late December the CPCE was at a low with complacency. A market selloff occurs as forecasted but the put/call immediately catapults to the 1.20 number indicating rampant fear and panic and a market bottom, which occurs. The put/call then drops into complacency creating the top and steep drop off starting during the last couple days of last year. The CPCE is now down to the similar levels as the late December stock market top. A lot of the put/call activity is noise nowadays due to the high volatility creating the large-point whipsaw action.
Thus, if you are bullish the market, temper your enthusiasm and be more tactical and cautious during the week ahead. A short position against the market for a near-term trade could be considered with a scale-in to the short side taking place during the week ahead. Check the CPCE and CPC put/call ratio's on Monday evening. If the CPCE drops under that thick red line the market top is here so it would be extremely important to have downside protection in place immediately. 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 8:29 PM on Monday, 2/1/16: The CPCE created a strong spank down at the opening bell this morning. The Dow was down 166 points. Stocks rally intraday, however, and the CPCE ends at 0.63. CPC is 1.02 in the middle area no man's land. Both put/call ratio's are going to need to move lower to signal a near-term top; there is not enough complacency in place. Thus, the market bulls may create buoyancy in stocks for a day or three.