CPC and CPCE Put/Call Ratios and SPX S&P 500 Daily Charts; Near-Term Bottom Approaching

The low put/calls during September verify the complacency in the markets. Traders blindly buy stocks. The fearlessness typically foretells a top, which occurs. Note the SPX falling out of that multi-month ominous rising wedge. The collapses from rising wedges can be quite dramatic; far more than the collapse shown so far.

The CPCE put/call jumps higher to levels not seen since the February stock market bottom. The fear and panic hints that the time to buy a bottom is approaching quickly. Keystone likes to use 0.80 as a sell signal on the CPC and the 1.20+ as a buy signal. The CPC is a whisker away at 1.18; that is close enough for government work.

Looking at the green circles, many call out the stock market bottom as a sharp event and stocks print an intraday bottom and rocket higher (this is typically in concert with happy central bank or Whitehouse news). Note that about one-half of those green circles there was a couple spikes higher a week or so apart. In other words, stocks may find a bottom, and pop higher, but it will be a fake-out where price then retreats again in a few days to a lower low in price, and then bounces off the next high put/call ratio that prints.

So you have to stay alert for a potential rally to occur at any time any day ahead. The new moon peaks Monday night at 11:46 PM EST. Stocks are typically weak through the new moon each month so that would be Monday into Tuesday. New money usually enters the stock market especially for a new quarter, which is bullish, but most of this occurred last week. Trading may be a little lighter in volume on Monday due to the bond market being closed for Columbus Day.

Mixing the above analysis together and sprinkling some magic dust on it, stocks are setting up for a relief rally but this may not begin until Tuesday afternoon or Wednesday. You will have to use the positive divergence on the SPX 2-hour chart to time the bottom in stocks which would honor the high put/call ratios.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.