CPC Put/Call Ratio and SPX Daily Charts

The CPC shows fear and panic above 1.20, which identifies market bottoms, and complacency below 0.70, which identifies market tops. The September top was identified by complacency, traders were not worried about markets and expected the indexes to move up indefinitely.  The October-November selloff followed and in mid-November the CPC moves above 1.20 to signal the fear is becoming rampant, thus, the markets bottomed and bounced strongly.  A stutter step occurs late November as the CPC dropped to an obscene low under 1.65 signaling uber complacency, however, the strong intraday spike low launched the CPC back up to near 1.20 which identified a bottom and the indexes ran up into the 1448 intraweek top last week.  This high print corresponds to the final red circle at 0.7 signaling that complacency is alive and well. Traders simply are not concerned about the markets and continue to believe a happy resolution will occur with the fiscal cliff drama.

The complacency at 0.7 marked the high last week for the SPX in the high 1440's.  Price then moved down to print in the 1420's on Friday's big drop.  This corresponds to the CPC moving higher now at 1.05, not where you could firmly believe in a bull rally.  Since 0.70 was the last signal print, if you use 1.20-ish and 0.70-ish as the signal lines, this hints that the markets will sell off until panic and fear shows up with the CPC jumping up and over 1.20.  This is the time to fine tune your long wish list and then once the CPC starts moving above 1.20, the nibbling on the long positions can begin.  Until then, traders remain far more on the complacent side. Considering that the fiscal cliff talks may be deteriorating, the flush in the equities markets which would result, would definitely take the CPC above 1.20. The dance between complacency and fear continues. 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.