CPC Put/Call Ratio Daily Chart

The fear gauge shows that trader's remain complacent and worry-free. Trader's expect the markets to continue higher without any possibility of downside. The CPC is a contrarian indicator so the low readings in 0.8's and 0.7's and lower indicate market tops. The fiscal cliff drama and FOMC today has markets in a tizzy, the intervention continues to make trading treacherous.  The May selloff was straightforward, forecasted in April with the low CPC's.  Then the market bottom occurred as the CPC launched above 1.20 showing that traders were jumping out of windows, hopefully first floor windows, as panic spread like wildfire and sure enough, that behavior produced a bottom and the rally began in early June.

The CPC then identified a market top due to more complacency in September and the October-November selloff occurred. The CPC sneaks out a print above 1.20 to show a tiny bit of fear and worry, and that was good enough to begin the rally form mid-November to present. Note that late November the uber complacency is off the charts under 0.65. This shows that the vast majority of all traders expect markets to go up and no one expects markets to go down.  This crowd has been correct as the SPX has moved from the 1350-ish low up to 1434 yesterday. The complacency remains so anyone talking about a wall of worry is off-base, there is no worry. The markets believe that the Fed will provide stumulus forever to keep goosing markets and that the fiscal cliff negotiations are theatre and a resolution will be announced any day.

The interesting aspect of this chart is that the fear was minimal that created the November market bottom, barely at 1.20.  The CPC has not printed above 1.20 ever since. If the Fed provides the crack cocaine today, the wine will flow like water, and the CPC will drift lower towards the 0.7's to increase the complacency, and continue to cultivate a market top. If there are negative surprises ahead, the VIX will spike higher, and the CPC will spike higher. A significant and highly attractive bottom for trading the markets longer term will likely not occur until the fear and panic plays out in the days and weeks ahead with the CPC spiking above 1.20. 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.