CPC Put/Call Ratio and SPX S&P 500 Daily Charts; Lowest CPC in 8 Months Signaling Rampant Complacency; Stock Market Near-Term Top At Hand

Humorously, waiting for the top in equities is like waiting for Godot. It'll be here any minute. The euphoric stock market bullish joy continues. Floor traders break out in song with an enthusiastic gospel rendition of "Oh Happy Day" as they buy stocks at the ask. The bullish happiness turns into a buying frenzy on Friday afternoon. Investors are worried about missing the train leaving the station so they are buying any stock with a heartbeat with reckless abandon. The SPX ends Friday at 2907 with a HOD at 2911 only 30 points from the all-time record high at 2941.

The SPX receives a spankdown as the hourly and daily charts show, however, the central bank largess and US-China trade hype continue to support and elevate equities. After price started to relax lower due to the negative divergence of the chart indicators, Treasury Secretary Mnuchin runs to a microphone and proclaims that the US and China have reached agreement on an enforcement mechanism for the new trade deal. Wow. That is big news since the expectation would be that the negotiations may continue for a couple years before the enforcement methodology was hashed out.

The Chinese leaders are filthy communists that have lied and not honored their prior pledges to America for the last three decades. The United States made China the super power it is today. The greedy American politicians and wealthy class shipped middle-class jobs and technology overseas so their huge stock portfolios could grow obscenely larger and lead into the present day generational and family wealth that the top 5% enjoy. America's wealthy elite class sold their fellow citizens out over the last five decades. The Chinese got away with things because the greedy American wealthy were busy stuffing money into their own pockets. Such is life. Humans are greedy animals.

Thus, China has zero credibility when it comes to any trade pact. This is why the enforcement mechanism is so critical. For Mnuchin to claim that an agreement has been reached is a big deal. For his sake, he better not have been blowing smoke up everyone's arse. Stocks leap higher on that news during the week which basically means that a US-China trade deal will occur.

Then China export data was very strong so analysts proclaim the global economy is going like gangbusters and all is great ahead. Copper leaps higher since global growth appears to be getting goosed by the PBOC's money printing. Always remember, the central bankers are the market.

[Keep in mind that the growth in exports may actually be due to the trade war. If you are running a company that uses Chinese parts to make your widget, any manager worth his salary would be doubling all parts orders for the last half-year as President Trump battles President Xi. When a trade deal occurs, Chinese exports may fall off a cliff since then the American companies will have to use their inventory up before getting back in sync with on-time shipping practices and efficient logistics between the US and China.]

China lending data jumps strongly higher. The communist nation's money supply is also growing. That is a green light for stocks since the liquidity has to flow somewhere and stocks are pumped higher to reward the wealthy class. It's a great game; if you are wealthy of course. The stronger Chinese lending data creates a pop in global stocks.

JPM beat on earnings and jumps nearly +5% on Friday. The Q1 bank earnings season begins with a joyous party. The banksters sip BOJ brandy and Fed wine. They smoke tasty Cuban cigars dabbing the smelly ashes onto the heads of the stupid huddled masses.  XLF gains +2% last week. The jump in banks and copper, the two parameters that Keybot the Quant has been highlighting, ran higher so the bull party continues.

Traders are ignoring any disappointing news and only touting the happy stuff to keep the joyous euphoric party going. Consumer Sentiment is 96.9 missing estimates but still a healthy number. The drop in sentiment correlates to gasoline prices. Americans are starting to complain that gasoline at the pump is now above $3 per gallon again. Higher gasoline prices typically dampens retail spending. No worries. There's President Draghi from the ECB pouring more monetary policy booze into the global punchbowl. The Fed, ECB, BOJ and PBOC form a congo line and begin singing Bobby McFerrin's "Don't Worry Be Happy."

The CPC drops to an 8-month low. So traders were very uber complacent and fearless about buying stocks last week and now they are very, very, very uber and euphorically complacent and fearless about buying equities. No one believes stocks will ever go down since the central bankers are printing money like madmen. Easy-peazy.

However, you know what happens when all traders are on one side of the boat. Yes, they are all wrong. The behavior of the put/calls remaining very complacent for long periods of time is not characteristic. This is ongoing epic and historic pricing action occurring in the stock market. The CPC drops to 0.74 the lowest reading since last summer when stocks were moving towards the Q4 waterfall crash.

June, July and August last year saw complacency at these levels which resulted in 100, 50 and 45 point pullbacks, respectively. Interestingly, price is at the same level as the top last August. Last September the bulls managed a further rally but you can see that price was already flattening and becoming tired. For the last month, the SPX has moved through 2800-2907 about a 100-point range with the euphoric break-out higher occurring on Friday. 

A big pullback would have already been expected in stocks over the last month but as explained above, the central bankers, happy trade talk and perceived great economic data keep driving stocks to the stratosphere.

The bottom line is to expect a big pullback at anytime, any hour, any day ahead. The downside should be from 40 to 150 points and since the markets have delayed a pullback for so long, perhaps there will be even more vengeance in store. Keybot the Quant remains long through all this market drama. Watch your wallet. The Sword of Damocles hangs over the market's head. 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.