Tuesday, February 7, 2012

CPC Put/Call Ratio Signals Significant Market Top At Hand

Keystone has posted this chart a few times over the last two weeks.  It is interesting to see the markets float skyward while the CPC stumbles lower.  Despite traders lamenting that they are worried about a pull back, the CPC shows the opposite.  Traders are completely complacent, no fear whatsoever; traders are positioned for the bull market rally to continue indefinitely. The problem is, that at these levels of fearlessness, the markets like to smack the longs down.

Any print under the red line results in a significant market top and signals that a broad market pull back is at the door step. Two weeks ago the complacency was even stronger but who knows, perhaps tomorrow the CPC will print even lower.  The indicators are positively sloped which is bullish for CPC and bearish for markets.

This is fun to watch develop.  Search your soul for any long positions currently held since a slap down should occur at anytime, and if you do not lighten the long side, you may hold those tickers for a long time.  Markets likely need a catalyst to start the fun. Extreme caution is suggested to longs, a broad market smack down is coming anytime.  This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here. Consult your finanical advisor before making any investment decision.
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3 comments:

  1. AnonymousFebruary 8, 2012 at 2:28 AM

    In terms of volume, is this market similar to last year's July volume before the August crash? This market just keeps grinding higher and higher and ignoring all the headwinds. Analysts keep on pushing stocks and saying that stocks are still under-valued. I wonder how high this market can climb on this volume. Thanks again for your insights.

    Steve

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  2. AnonymousFebruary 8, 2012 at 7:31 AM

    Are some of the usual technicals such as negative divergence,CPC, etc less effective due to the effects of stealth QE/levels of liquidity? I have seen negative divergences building in many sectors and names for weeks while price continues to advance on no volume- it's like the late 90's where stocks went up endlessly until they crashed. Are you seeing a change in the reliability of indicators/patterns?
    Thanks LeeAnn

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  3. Keystone SpeculatorFebruary 8, 2012 at 12:28 PM

    All good thoughts and no doubt important. Volume is lower than when everyone was bullish starting in October, a stronger bull market should show more participation but it is not.

    For indicators, they should be fine, charts like the CPC simply need a few days time, they are not exact indicators, so patience will probably show the way. QE has definitely popped the markets the LTRO in Europe and Bernanke saying low rates to 2014. We will find out exactly how this is priced in over the next day or two. When markets drop the Fed will have QE3 ready to go which probably will be a summer rally. the lesson is to use extreme caution if long. Keystone's algorithm, Keybot the Quant, in the left margin is on the verge of going short.

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