Monday, August 15, 2016

CPCE Put/Call Ratio Daily Chart Signals Near-Term Market Top At Hand

The drop in the CPCE put/call ratio gets your attention. It is not surprising given the level of euphoria and complacency in markets. Traders cheer the weak Chinese data last Friday morning since the PBOC will provide more easy money. The central bankers are the market.

The Brexit was the best thing to happen for the bulls. Instead of doom, Britain's vote to exit the European Union (EU) resulted in BOE Governor Carney standing before the nation promising to print money as far as the eye can see. Not only that, but the BOE is reducing banking regulations so it is easier to lend money. The ECB and BOJ plan more easy money policies. These people are very sick. The Fed balked at hiking rates before the Brexit vote citing it as an excuse. Then after the Brexit was approved, the Fed basically chucks the idea of a rate hike this year creating more stock market joy. The chatter of more PBOC money printing over the weekend and early this morning is the cherry on top of the eight-year central banker sundae. However, too many sweets are not good for you. Perhaps the markets will develop a tummy-ache.

The low 0.51 number is the lowest since the weeks of 5/23/16, 7/27/15 and 6/18/15. So this level of complacency in markets is a multi-month low. Investors are not only complacent but extremely fearless and relaxed about the stock market. Traders believe that central bankers will always goose equities so they imitate Alfred E. Neuman and proclaim, "What? Me Worry?"

The May 2015 top led to a drop in the SPX from 2120 to 1985 over one-month's time; a drop of 135 handles. The July 2015 top is a drop from 2115 to 1867 over one-month's time, a whopping 248 handles. The June 2015 top results in a drop from 2127 to 2044; a drop of 83 points over three-weeks time. The top that is at hand now will probably result in a move lower in the SPX of 40 to 100 handles and perhaps a heck of a lot more.

When the boat is fully loaded to one side and the party is in full swing, what do you think will happen? The CPC put/call ratio is low at 0.7-ish also verifying complacency. The tricky part is the top call on the SPX which can happen at anytime in the hours or couple-few days ahead. The near-term top and slip-slide lower for stocks is likely on tap sooner rather than later; perhaps beginning in the morning. 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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