Stock chart patterns and technical analysis (TA) explained simply. Disclaimer: This blog and all its contents are for educational and entertainment purposes only. Do not trade or invest based on any information seen on this blog. Please read Terms of Service. The K E Stone blog sites (Keybot the Quant) are blacklisted by Google, so enjoy the ad-free experience, and only use the Donate button when supporting the sites.
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Tuesday, October 16, 2012
CPC Put/Call Daily Chart
The CPC takes a huge drop lower yesterday down into the 0.7's. Complacency rules the markets. Even after the SPX 35-handle drop from 1470-ish to 1425-ish, traders have zero fear of any market downside occurring. Chairman Bernanke has trained traders well with the QE3 Unlimited promising to print money until the cows come home. No matter how much you hear in media, print, Internet or television, about how traders are worried about the downside, it is simply not true. There is zero wall of worry. With the low CPC, traders fully expect markets to go up indefinitely and see no reason to even pay attention to markets, the bullish case is guaranteed. Of course the CPC is a contrarian indicator where the complacency actually tells you that the markets are at or near a top.
Every one of the red circles identify a top in the SPX, some of them intraday tops where the downside only lasted a day or two, while others led to multiple days of selling. The SPX 1475 market top is identified by the low reading on 9/14/12. The market top seven days ago occurs with the 0.81-ish print but the selling was already prognosticated by the low 0.7 readings. The 20 MA moved up thru the 50 MA (green rectangle) so this says the CPC has higher prices ahead, which would be in conjuntion with market selling. The broad indexes are not worth buying long until the CPC prints above 1.20 when fear, worry and perhaps panic will be in place. With the CPC now back in the 0.7's, it is far more prudent to set up short currently and let this new short term market top take place leading to more selling in the broad indexes. 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.
Keystone, what is your take on the strange divergence between $CPCI and $CPCE, it seems $CPCI was the only reason for the $CPC drop and it was my understanding that $CPCE was primarily retail with $CPCI institutional and $CPCE has hardly budged. I don't follow these closely. Is this a normal occurrence?
The CPCE moved down yesterday but not down as much as the CPCI which took a big drop like the CPC. The CPC combines the index-only ratio and the equity-only ratio. The CPC provides a more clear signal than the other two although the same theme can be used. The tricky part is that you never really know the true story behind the numbers because is a trader for instance, on the put side only, or is it actually a hedge position where he is protecting his longs. There is lots of internal action that can muddy the waters. But, like any tool, it does not matter how or why it works, only that it is reproducible. And the CPC at 0.77 and lower is saying that short protection is required in these markets since a strong down draft can occur at any time.
Keystone, what is your take on the strange divergence between $CPCI and $CPCE, it seems $CPCI was the only reason for the $CPC drop and it was my understanding that $CPCE was primarily retail with $CPCI institutional and $CPCE has hardly budged. I don't follow these closely. Is this a normal occurrence?
ReplyDeleteThe CPCE moved down yesterday but not down as much as the CPCI which took a big drop like the CPC. The CPC combines the index-only ratio and the equity-only ratio. The CPC provides a more clear signal than the other two although the same theme can be used. The tricky part is that you never really know the true story behind the numbers because is a trader for instance, on the put side only, or is it actually a hedge position where he is protecting his longs. There is lots of internal action that can muddy the waters. But, like any tool, it does not matter how or why it works, only that it is reproducible. And the CPC at 0.77 and lower is saying that short protection is required in these markets since a strong down draft can occur at any time.
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