CPC CBOE Put/Call Ratio Daily Chart Signals Near-Term Top

The market bears have been slapped by the non-stop bullish euphoria. The central banker intervention in markets over the last eight years has created distortions. Stocks remain buoyant due to central banker easy money. The stock market rally after the early November presidential election, when Donald Trump won, continued into mid-December. The CPC shows fear and panic going into the election (CPC above 1.4) but that evolved into joyous euphoric partying heading into Christmas with stock prices rising (CPC at 0.6 in mid-December).

The low reading in mid-December signals a significant market top in the near-term, however, the bears keep getting screwed by news events and data that pump stocks higher. Traders are ecstatic over President Trump's plans to spend a ton of money on infrastructure projects, his plans to reduce regulations and very importantly his plans to reform and lower taxes. The stock market rallies higher and yields run higher. Some money moves from bonds to stocks. The dollar moved higher (but has been retracing lower the last few weeks the USD now sits at 100.00). The majority of investors started touting that inflation is here and accelerating.

As the president entered office on 1/20/17, he is signing executive orders like a madman which further excites investors that changes are coming fast all for the better of the stock market. On Friday, President Trump and his two crony Goldman Sachs henchmen, Cohn and Mnuchin, conspire to hack at Dodd-Frank and other rules that regulate the banks. The wealthy elite class and banksters always protect their own as the number one priority. This creates the huge rally in banks to end last week pumping the broad stock market higher.

In the Friday jobs report, the wage data is weak. In fact weekly wages are actually slowing, which is nothing anyone wants to talk about, as the average week hours drift lower. Inflation, that the Fed and other central bankers have tried to create with their obscene Keynesian monetary policies for the last eight years, cannot exist without wage inflation. Without inflation occurring, the Fed's grand eight-year experiment would be a failure only succeeding in making the wealthy filthy rich. Further, the velocity of money is at lows not seen since the 1950's. Money is sitting at the banks and not being lent-out but people and businesses do not want the money due to the stagnant and sick economy with low demand. This will hurt President Trump since he and his GS henchmen think less regulations will spur the lending but it likely will not.

The weak wage data last Friday creates euphoric joy. All Hail the central bankers! Praise and Glory to their Power! Weak wages means the Fed will not hike rates three times this year. Instead, Fed Chair Yellen, Queen of the Doves, will remain accomodative this year. Stocks catapult higher since the easy money party will continue indefinitely. The central bankers are the market.

Setting all this windbag commentary aside, and looking at the CPC chart, under 0.80 are identifying market tops and above 1.20 signals a tradeable bottom. Note how price remains under that blue bar ever since early November when this latest stock market rally began. The bears have been screwed with this action. For the reasons above, stocks remain buoyant and the sideways churn helps eat up the negativity that would have driven prices lower.

Nonetheless, the CPC is back down to 0.76 proving that traders and market participants are complacent, care-free and not worried about any market pullback. There are talking heads on television this morning telling viewers to "buy, buy, buy!" The low CPC signals that a near-term top is at hand any hour any day ahead, and stocks will sell off until a 1.20+ number prints which will signal a tradeable bottom. Since the bears were screwed by the odd market action over the last few weeks, the pull back may be strong providing some pay back against the bulls. If stocks rally today, the CPC will likely move lower and that only further seals the market top. Shorts can be placed then maybe wait a couple days to see if stocks roll over, if not, and the CPC is lower, then scale-in with more shorts.

if you are thinking of buying stocks on the long side, the chart above says you are a fool, in the short term. If you are caught up in the hype and want to buy long you would be better off waiting for a week or two when prices are lower and ideally wait until the CPC prints above 1.20 before you nibble on longs. In the longer term, stocks may be in the process of printing a multi-year top over the coming weeks so the long side in general is not appealing. 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.