CPC Put/Call Ratio Chart Signals Significant Market Top

The CPC drops to 0.72 on Friday indicating growing complacency. Traders see no reason whatsoever to buy protection for the downside. The ideal time to enter long positions is when the fear is rampant above 1.20.  The nice thing about entering longs when the CPC is over 1.20 typically results in a winning long trade even if the ticker you pick is lackluster. In other words, you receive the maximum oomph when you buy at the market bottom that occurs above 1.20. The green circles show recent market bottoms and the red circles show recent market tops. 

Right now, at sub 0.75 is the complacent end of the spectrum. Going long in here, even if markets eek out a few more handles of upside, will typically result in losses moving forward. The action can reverse very quickly and violently. The uber low sub 0.65 level shows zero worry of any market downside. Directly the next day after that low print the SPX dropped 25 handles intraday. The SPX recovered quickly but this shows the potential for very violent action ahead. Folks always figure that since buying protection for the downside is so cheap, there is no worry to buy any, or short any stocks, since this behavior will stay this way a while, and, if the markets sell off, there will be plenty of time to then go in and develop short positions. The markets rarely give you that opportunity, sometimes the moves occur so fast that by the time you return from the john, the SPX is down 30 handles. There is an interesting week of trading ahead. 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.