SPX NYMO CPC Daily Charts

The red circles show the market tops due to complacency and lack of fear in the CPC put/call and low numbers printing for the NYMO. The NYMO is now -100 which begs for a market bounce but there is an interesting aspect to the charts above. Note the May top and sell off that resulted in the June bottom. That bottom was identified by a -100 NYMO and CPC well above 1.20, up at 1.40, signaling fear and panic, so a bottom was placed. Interestingly, as markets have now dropped about -4% off the 8/2/13 top, the NYMO is -100 again but the CPC shows a continued lack of fear by traders. Complacency continues with traders fully believing in the Fed easy money and that a strong rally will begin at any time sending the indexes to new highs again.

The behavior above hints that a bounce is needed due to the low NYMO, but the bounce may be short-lived, and stocks continue to not be attractive from the long side until fear and panic shows up with a CPC above 1.20. Obviously, the behavior described opens the door to a potential crash-type scenario like August 2011. That would definitely send traders into the fear and panic mode. The VIX is above 15 showing that some traders are starting to seek protection and are becoming concerned over the stability of the equity markets. 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.