CPCE Put/Call Ratio Daily Chart Signals Significant Market Top

The beat goes on. The CPC and CPCE put/call's have been ringing a bell the last 2 to 3 weeks. The uber low 0.46 print is a dire signal for markets. For any bears discouraged about the continued upside buoyancy in equities, take solace in the put/call's, as well as low volatility. There is no fear at all in the markets. Even those that wax worry on television or in print media run in to buy the long side 10 minutes after their interview. The tiny amount of traders that do believe in a stock market pull back are taking profits on the high-flying momo, biotech and small caps stocks, but not placing this money in cash, instead, they are running into the perceived safety of blue chip dividend stocks as evidenced by the Dow outperforming the other major indexes the last couple weeks. This is not a worried bunch of traders, in fact, they are simply rotating to other areas fully believing in continued Fed intervention that will create markets growing to the sky forever. The compalcency is rampant.

Once the low 0.46 print occurred, a 2-week window was set up where a top would be expected. Currently the SPX top 2 weeks ago continues to hold although price remains elevated at the same level.  The small red circles show the stints of increased complacency creating little market peaks in the SPX. Time is running out. Note the prior market tops played out over 2 to 3 weeks time. This week tells the tale. Can the markets spurt higher on Monday and or Tuesday, early week, for another new all-time high on the SPX taking out the high from 2 weeks ago? Sure it can, however, the markets appear on borrowed time now and the anticipation would be that a market top occurs any day this week and the downside selling will begin.

Since traders are uber complacent, and even those that are a little worried only moving into other sectors but remaining fully long, the lack of fear and disrespect for any downside occurring may result in a far more serious market correction than anyone expects. The markets are long overdue since a 4-1/2 year rally is within the top five longest rallies of all time in the history of the markets, similar to the 2003-2007 rally. Traders seeking safety in blue chips and divvy stocks will be beaten along with everything else. A television pundit this weekend is telling folks to buy SDY, a dividend ETF, like DVY, with both hands now, which appears irresponsible. The dividend stock bubble is likely going to pop as part of the downside coming. If you enjoyed the upside this year take the money and run. Git outta Dodge while the gittin' is good. Once the selling starts it may become quite dramatic. If you do not like to short the market, then simply sell the longs and move into cash for a while and see how it all plays out. Prepare a long shopping list and do not even think about entering the market long until the CPCE prints inside the green box when there is blood in the streets. 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.