CPC and CPCE Put/Call Ratios and SPX S&P 500 Daily Charts; Panic and Fear Remain on a Milk Carton (Missing)

That was a wild week. The Keybot the Quant algorithm is long printing a huge 50 numbers this week this behavior not seen in many years verifying the historic stock market activity. We are likely witnessing an epic inflection point in the stock market in real-time that will be talked about for decades to come. Despite the wild roller coaster ride last week and the US stock market slipping into a -10% correction, albeit briefly, traders and investors continue foaming at the mouth to buy stocks.

Pavlov, who just passed his drug test and is now an employee at the Federal Reserve, is a printing press operator in the basement of the Eccles Building. Several times each day, Pavlov opens a window and tosses cash to waiting traders and investors. They grab the easy money and buy stocks, bonds, real estate, art, antique cars, collectables, diamonds, gold and other items of perceived value pumping all asset classes into bubble territory. Traders and investors have become Pavlov's dogs, foaming at the mouth and rabid to buy stocks every day since the Fed and other central bankers guarantee that stocks will go up forever. Pavlov stops the printing press for a second as he is introduced to another new Fed employee, Moral Hazard.

Market participants remain overly bullish. This is evidenced by the many television and internet pundits proclaiming that everyone is too bearish. It shows you how stupid most of the people on Wall Street actually are. The CPC and CPCE put/call ratio charts always tell you if there is complacency, when you should sell, or panic and fear, when you should buy. Panic and fear remain on a milk carton.

Below the red lines is complacency and fearlessness in the stock market. This is when cousin Paul brags to the family that he took an entire paycheck and bot AAPL stock. It is also when coworker Mel boasts at the water cooler that he owns TSLA, NFLX and AMZN stocks and soon he will be able to blow this popsicle stand. And don't forget Aunt Mary, who was the local librarian at the public library for 32 years. Mary took her entire life savings and invested it in FB stock because her grandson, in his cheap JCPNQ (bankrupt JC Penney) suit, who is now a financial manager working in the office next to the laundromat, said it was a no-brainer.

Stocks peak out at the start of September and the SPX drops -10% into a correction but if you blinked you missed it. Pavlov's dogs, er, investors, ran into the market buying the dip like madmen, and madwomen. This rally carries stocks into the weekend. It took a long time, four months, for stocks to top-out after the initial drops in the put/calls. This is very atypical and only occurs now, and last December 2019 into the February 2020 top, due to the 11 plus years of obscene central banker intervention in global markets. The central bankers are the market. These sick pups, that perform the bidding of the wealthy class, receive lucrative kickbacks once they leave public life. Such is the crony capitalism system.

The bottoms in the 21-day MA for CPC and CPCE pinpoint the tops in the stock market. Equities are receiving a relief bounce right now like late June so watch to see if it is a back kiss of the 21-day MA, or 20-day for the SPX, and a spankdown failure (a successful back test), occurs, or, if the SPX price comes up to the moving average and pops above to prove that the bulls are running the show going forward.

Panic and fear is shown when the put/calls print above the thick green lines. That is when folks are screaming bloody murder. The blood is flowing on Wall Street. Carnage, mayhem and other descriptive words will dot newspaper, internet and television headlines. That is when investors begin tossing stocks out the window simply to raise cash as margins are called in. Gold is sometimes sold off during these periods, or at least move flat, rather than strongly upwards as many would think would happen, because people are trying to raise cash. At work, people will mention that the stock market is dropping. You will feel the angst. The green circles show the May bottoms which were cheesy. The CPC did not quite reach the 1.20 level that begins ringing the bell of fear, panic, dread, negativity and that 'get me out of the market' vibe.

Stocks have dropped in September and when the path is in one direction during a month, the last few days typically move opposite which would be up for the week ahead. Q3 ends on Wednesday; the monthly charts will receive new prints cast in concrete and window dressing comes into play where money managers will dress-up the stock holdings in their funds to show that they held the best stocks. This may create some market buoyancy early in the week. New money is typically put to work at the start of a new month especially at the start of a new quarter which creates a slight upward bias in equities.

The full moon peaks on Thursday at 5 PM EST and stocks are usually bullish moving through the full moon. Everything is going the bulls way in this VST (very short term). Also utilities rallied on Friday sending UTIL above 8 hundo to the 808 palindrome which is a market positive for the days and weeks ahead. The SPX bottomed on Friday morning, as Keystone explained would happen with the previous 2-hour chart on Thursday; and stocks rally. This buoyancy may continue to end the month due to the bullish factors at play in the background.

A huge wildcard is the presidential debate on Tuesday evening, 9/29/20; Trump versus Biden. Republicans have painted democrat Biden as a weak, fragile and bumbling man, unable to string two sentences together into a coherent thought. If this proves correct, and King Donnie is the victor Tuesday night, the stock market will likely rally for a few days. If, however, Biden holds his own against Trump, and perhaps even wins the debate, stocks may sell off. Everything is a crap-shoot with the election less than 6 weeks away even these outcomes. Biden may win the debate and stocks may rally since he will be providing loads of fiscal stimulus. Wall Street likely views Trump as more friendly to their rigged game although Biden will jump on that train as well; just as President Obama did kissing the investment bank's butts while telling the huddled masses that he feels their pain. All these politicians are the same. Wall Street is more concerned over certainty than anything. Uncertainty creates the backdrop for stocks falling.

The last few spikes in September in the put/calls represent the mini-bottoms taking place. When the CPC and CPCE edge above those thin green lines showing prior price resistance, the dip buyers will be anxiously buying stocks thinking that the bottom is in. The bottom is not in for the stock market until those thick green lines are hit. Keystone is becoming more zen-like as he ages, so he gives you permission to nibble on long positions if the CPC begins moving above 1.10 but only very light nibbling. You want to buy, buy, buy when the put/calls move above the green lines. The smart long players have not yet found what they are looking for (higher put/calls signaling fear and panic).

While you are waiting for that to happen, you should be doing homework on what long positions you want to bring into the portfolio. Do you simply want to own the market indexes, or perhaps a sector index, or individual companies that you think will prosper going forward? Have your buy list ready and then you can cycle into those long positions as the put/calls run higher. Find stocks that are positively diverged in the daily and weekly time frames since you can time those with the put/calls signaling panic and fear and that should set you up for a multi-week rally for your picks.

In the near-term, the put/calls say there is more pain ahead for stocks. The paragraphs above, however, highlight the bullish things occurring now to end the month so it is reasonable to expect a mini relief rally in the week ahead and perhaps some sideways choppiness. There should be another dip lower for stocks, however, to bring on the fear and panic, probably as October begins. The bears say you ain't seen nothin' yet. The selloff may be linked to a potential failure to reach a fiscal stimulus deal.

The dirtbag politicians cannot agree on providing relief to people in need that no longer have a job. Why would they care? They never missed a paycheck during this ongoing covid crisis, they sleep on the finest linens of Egyptian cotton, eat the finest foods prepared by the finest chefs, there is no time to address the needs of the lowly and forgotten huddled masses. Let them eat cake. If negative news occurs on the fiscal package, stocks will likely tank and show you the fear and panic.

Watch The Keystone Speculator's two key cyclical market indicators the NYA 40-week MA cross and the SPX 12-month MA cross. The NYA 40-week MA is at 12306 with price at 12445 so the bulls enjoy a cyclical (weeks and months ahead) bull market. Likewise, the SPX 12-mth MA is at 3108 with price at 3298. Keystone calls this metric the cliff edge since if the SPX loses 3108, which is only 190 points away, and the index was only a hundo points away form this cliff last week, it is likely that the stock market will crash. As stocks drop say early October, watch the 3108 level like a hawk, which probably will hold. If the SPX does not hold 3108, it is all over for the US stock market. Long-term players can use these two metrics as lanterns lighting the way for the weeks and months ahead. 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.

Note Added Tuesday Morning, 9/29/20, at 5:30 AM EST: The CPC drops to 0.77 and the CPCE is down to 0.45. Wheee! Whooopie! The bull party is in full swing. Aunt Mabel, typically very frugal with her money, took her entire life savings out of the bank and bot AAPL, AMZN and TSLA stock because she needs the big gains for her retirement. Father John, the local pastor, secretly used last week's collection basket money to buy the triple Q's. He says he is doing God's work; just like GS said they were doing during the Great Recession a decade ago. The stock market bulls remain uber complacent and fearless. They still need to be taught a lesson and interestingly, the October crash month is nigh.