Friday, August 19, 2016

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

The drop in the CPCE put/call ratio continues to get your attention. The CPCE chart was posted a couple days ago and now price retreats again firmly verifying the complacency and lack of fear in markets. Traders believe that the central bankers can pump stocks higher forever. What happens when everyone is on one side of the boat?

The low 0.54 number is near the low 0.51 number the other day and 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. Since the put/call has not printed an elevated reading (indicating a stock market bottom) since June, the market selloff may be quite substantive even a couple-hundred S&P 500 handles lower would not be surprising. It all depends on how low the central bankers will permit stocks to sell off.

The CPC put/call ratio is low at 0.7-ish, yesterday at 0.86, also verifying complacency. The low sub-12 VIX obviously verifies the complacency and lack of fear that markets will ever sell off. The SPX is ready to roll over. Thus, if you are not married to a particular long position, ditch it, and it would be prudent to bring on index shorts. Stocks should sell off until the CPCE put/call rises and prints inside the green circleThis 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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