The stock market is about to have a religious experience. The CPCE put/call ratio prints a multi-year record low on 11/10/20 so the top watch in the stock market continues ever since. Typically, after such a low reading, the stock market will top out anytime over the coming days sometimes up to a couple weeks and it has been 8 trading days now so stocks should buckle at any time. The red circles show stock market tops and the green circle is the key March bottom at the peak of fear and panic. What do you think will happen?
The CPCE is at 0.40. A 0.4-handle is uber low but a 0.3-handle printed at the lows days ago. Everybody and his brother are long the stock market. The uber complacency and fearlessness identifies a stock market top. Traders and investors are betting their kid's education money on the quintuple long 5X tech ETF; QQQQQ. Fred Flamer has all his clients 100% long AMZN and AAPL stock. He says its a no-brainer although he has decided to diversify and will buy TSLA stock with all the new money flooding into the fund. Everyone is afraid they are missing the vaccine train leaving the station. It's the silly, giddy season.
The vaccine news means an end to the pandemic by summertime. Mask-less ladies will be frolicking at the beaches in colorful bikinis displaying glossy lips and welcoming smiles for mask-less men. This isn't going to happen. Americans are an optimistic bunch but by Valentine's Day they will be wallowing in pity and misery asking, "why?!" The coronavirus data is ramping higher out of control. Reference Keystone's articles in the coronavirus series. Article #25 was published last Sunday with an ongoing daily chronology added since and Article #26 is slated for publication on Wednesday, 11/25/20, Thanksgiving Eve.
Americans are not ready for the sh*tstorm coming their way. Citizens no longer listen to the never-ending confusing messages on television; wear a mask, don't wear a mask, masks help others not you, now they help you, do this, don't do that, can't you read the sign? The vaccines are not going to be the magic wand that makes the virus disappear by July 4th.
In September, only 50% of Americans were willing to take the vaccine, now it is not that much better at 58%. The US will need about 60% to 80%, or more, for herd immunity so it is going to be an uphill battle if everything goes right. Say there is about 10% who have contracted covid whether they know it or not and add that to a 40% or 50% vaccine participation barely gets you to herd immunity. That is why Fauci, Birx and other say you may be wearing masks through next year.
The virus immunity does not kick in until about a month or so after the initial shot; there are two shots about 3 weeks apart. Pfizer and Moderna are not telling folks that it would take them three years to make enough doses to vaccinate everyone in the world. Of course the wealthy elite class will receive the vaccine first if they choose to take it. For the US, there may be enough doses to achieve herd immunity by summertime so the virus will be in everyone's lives a long time. This negative talk is far removed from the happy vaccine party over the last couple weeks, isn't it?
On top of all that sobering vaccine reality, is the new mRNA technology angst, so the CDC, Whitehouse and medical professionals need to get out in front with the proper messaging about the messaging RNA, otherwise, social media is going to mow them over. There is concern the vaccines may alter the DNA in a human body. Currently, in animal studies, this is not the case, however, if the authorities do not get out in front of this immediately, now, and educate the public in an offensive position, the rumors and conspiracy theories will begin labeling the vaccines that way and any hopes of a vaccine program will go down in flames. Nobody wants their DNA modified. Americans may not be thrilled about other tracers, animal proteins and/or preservatives such as mercury in the vaccines. If the public is not informed now before the vaccine misinformation begins, especially in relation to DNA modification, the vaccines have no hope and next year America will look like The Grapes of Wrath with tumbleweeds floating by the front door that sits off its hinges creaking in the dusty wind.
Not only are the uber low CPCE and CPC put/call ratios signaling a significant top so are other important metrics like the NDXA150R and SPXA150R. The SPX monthly chart is topping out with negative divergence which means a historic multi-month and perhaps (likely) multi-year bear market is about to begin. The AAII Investor Sentiment readings show bullishness at a 3-year high. The euphoria is off the charts and the beautiful part about it is that everyone is touting how bearish everyone else is. This behavior verifies the top even more; no one is skeptical that we are at a major top and that is when the tops occur.
The multi-month low put/call readings are historic. If you are new to trading, you are seeing stuff that is rare. These are epic times that business and economic students will be talking about for decades to come. If you did not trim long positions last week and bring on shorts, shame on you. Who knows, markets may crash on Monday. A flash crash is on the table going forward and it will be one that goes down but does not come back up. It's going to be fun. Blood and carnage coming soon to Wall Street. The selling will begin any minute, any hour any day ahead. The week ahead is Thanksgiving so markets are closed on Thursday and only a half day on Friday which is typically a bullish day. With lower volumes, things may get dicey quick.
Congress and Mnuchin are trying for another fiscal stimulus deal so hype around that will try to keep the stock market elevated. Ditto the vaccine talk but you know what is coming there as explained above. This is epic stuff, folks. Get out of the stock market if long and do not look back. Since it took an extended period of time for the top to finally appear (the multi-month lows in the put/calls are unprecedented), the selloff may be quite extensive into and through year end; just have to see how it goes and see how the charts develop. Let that dough sit in cash for a few months and simply watch what happens. Get ready to see some wild stock market action. When the VIX spikes higher as stocks drop the intraday and day to day price moves in the stock market will be huge. A tradeable bottom will not occur until the CPCE moves above 0.80 so that is when you can nibble on longs for tactical trades. 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.