CPC and CPCE Put/Call Ratios Daily Chart; Fear Returning to Markets; Stock Market Bottom Likely Forming in the Days Ahead

This year has been one big upside party after the global central bankers such as the Fed, ECB, BOJ and PBOC colluded to save the day a la early 2016 when the Tweezer Bottom occurred. The central bankers are the market. At the same time, President Trump spikes the Fed's punchbowl with happy US-China trade talk this year. In tecent days, the stock market price action is becoming choppy as the trade war drama plays out and the realization that inflation, that the Fed has tried to create for the last decade, is Godot.

The low put/calls indicate rampant complacency which calls a stock market top while the spikes in put/call ratios indicate that panic and fear are entering markets and that is when bottoms occur in equities. Typically, these signals are always good for calling tops and bottoms in a few days time at least within a couple weeks. Not anymore. Over the last decade, the central banker have destroyed all price discovery in markets with their obscene Keynesian monetary policies. These are not your grandfather's markets. Hence, the long period of complacency occurs which is atypical behavior.

Equities sold off on the negative US-China trade deal drama, but King Donny is quick to run to Twitter and say all is fine to create a stock market rally. It is nauseating to see what the United States has become over the last five decades; capitalism obviously in decay. Last week, with the lackluster trading, the put/calls spike higher so traders and investors are finally worried about the stock market for the first time since December. They know the Federal Reserve and other global central bankers will provide bail-outs and easy money forever so there is no reason to worry but nonetheless, there is panic, fear and doubt entering markets (typically a good time to buy).

Keystone likes to reference the CPC 1.2 level and the CPCE 0.80 level as the demarcation line where rampant fear and worry, and a likely stock market bottom, begins to take shape. Interestingly, the last time the CPC spiked above 1.20 was in mid-December and the bottom occurred in stocks 10 calendar days later (6 trading days later). So King Donny's proclamations will continue tossing stocks to and fro but the put/calls suggest that a stock market bottom is likely say anytime within the next five to seven trading days. Also keep in mind, equities may retreat more as the stock market bottom forms. The next few days may be quite entertaining. If you see a spike way higher in the put/calls, you would want to be adding equity longs for a short-term trade. 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.