CPC Put/Call Ratio and SPX S&P 500 Daily Charts; "Jawbone Rally"; Near-Term Top At Hand

Stock have received a strong goosing over the last 2 weeks from happy trade talk and global central banker dovishness. It started with the Whitehouse releasing happy news about the US-China trade talks (with no detailed information). Then President Trump tweets same. Then Treasury Secretary Mnuchin says same. Then China chimes in with happy talk. Then the Federal Reserve began flapping dovish wings with Chairman Powell pushing off rate hikes into the future. Equities explode higher on the central banker easy money forever that continues for a decade.

It gets better for the stock market bulls with more US-China happy trade talk (still without any details). The PBOC (China's central bank) announces a triple R cut (which allows banks to lend more freely to spur the economy) creating more global market joy. Then ECB President Draghi hints that their easy money policies may continue for a longer period of time. Traders cheer the central bankers. They are modern-day money God's that can pump stock markets higher instantaneously with their dovish coos.

The BOJ then promises to maintain its easy monetary policies with no plans to change course anytime soon. Global investors are throwing confetti, drinking Fed wine and PBOC baijiu, and singing songs such as "Happy Days Are Here Again."

Then Fed Presidents Evans and Williams as well as others murmur soft dovish tones boosting equities higher. For gosh sake, whatever the Federal Reserve sees coming down the pike during the first few days of the new year (the 1/3/19 mini-crash) must have really scared them, as well as other global central bankers. The global central banks collude on policy the last few years and the ECB, BOJ and PBOC each saw a need to speak dovishly to get the global stock markets off on the right foot for 2019.

The upside joy then continues with more happy US-China trade talk. The Chinese announce plans to take the trade deficit to zero over six years time. The communists pick six years to appeal to President Trump's ego. Of course if Trump is re-elected in November 2020 he will serve another four-year term which totals six years from now. The Chinese, as do other foreign leaders, know that Trump feeds off adoration and praise, and this character flaw can easily be used to get better deals, hence they pick six years to stroke his ego. The filthy communist leadership in Beijing has no intention to ever follow through with a six-year plan; it is simply more talk and smoke and mirrors.

All of the above happy juice has sent the S&P 500 from 2450 to 2675 a big 225 points, +9.2% in 11 days. If you had to split the last couple weeks of bullish joy into categories, the SPX likely popped about 65 points due to happy US-China trade talk, about 40 points for the PBOC stimulus, about 90 points for the Fed dovishness, 20 points for the ECB dovishness and 10 for the BOJ dovishness. Add all that together for the two-week "Jawbone Rally." The only true concrete action item is the PBOC's triple R cut; all the other promises on trade and dovish central banker talk is nothing more than jawboning and lip-flapping. 

Aren't the markets a joke due to the central banker intervention? All price discovery has been destroyed over the last decade by the central banks. No one actually knows what anything is truly worth anymore. We will all find out together in the weeks, months and couple years ahead.

All the politics, trade and central banker stuff aside, the charts above indicate a top at hand. Traders are drunk as skunks on the central banker booze, dancing with lamp shades on their heads, buying stocks at the ask. Everyone is convinced that the coast is clear. Investors are afraid of missing the train leaving the station. They are running down the tracks throwing money at the caboose trying to buy shares with reckless abandon. There is no fear. Traders are convinced that stocks will continue rallying joyously higher as verified by the low put/call ratio. Do not be a fool and chase the market higher. It is about to retreat.

The last uber low put/call at the end of 2018 resulted in a top near 2625 and drop to 2450 so that pull back was about 75 points. This is when the Fed stepped in with dovishness to save the day. Obviously, the central banks were worried that the stock market was rolling over into oblivion so Powell started flapping his dovish wings like a madman. The central bankers always rescue the stock market to protect the wealthy elite class that own large equity portfolios. The central bankers are the market.

Ditch your VST and ST long plays and bring on index shorts. You should have opened shorts or bot protection yesterday. It may take a day or three to top out and drop, but you want to be on the short side for the days ahead. Next week ought to be very interesting. 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.