CPC and CPCE Put/Call Ratios Daily Chart

The stock market remains on a roller coaster ride. The elevated VIX creates the wild intraday and day-to-day point swings. Keystone pointed out the uber complacency last week with the put/calls, the lower red circles, and forecasted a pullback. When the complacency and fearlessness gets too out of hand, traders have to be spanked.

The S&P 500 drops from 2520 to 2440 over a couple-day period which is 80 handles. This move is interesting since it happened very quickly. Usually, after the uber low put/calls print, it may take a few days for stocks to peak and then collapse. Investors are itching to buy a bottom.

The central banks gave the all-clear on Friday stepping-in as usual to save the day. The PBOC cut the triple R's (reserve requirement ratios). This is the amount of dough the Chinese banks are required to maintain in reserve so lower requirements allow them to lend more and boost the flailing economy.

In addition, Federal Reserve Chairman Powell flaps his dovish wings delaying rate hikes. Powell appears side-by-side with former Fed Chair's Bernanke and Yellen. All three are cooing dovish love tones for the stock market. The Keynesian triumphant fly above the adoring privileged class dropping money from helicopters. Always remember, the central bankers are the market. The ongoing global central banker collusion created the all-time record highs in the stock market in 2018.

The jobs report on Friday creates a trifecta of orgasmic bullish joy. Traders trip over each other buying stocks at the ask. Friday is one big party into the weekend. Everyone is convinced the worst is over and it is now time to buy stocks with both hands. Analysts immediately proclaim that a big rally is beginning and you had better jump aboard. The put/calls drop like rocks again. Yes, everyone has immediately fallen back into complacency convinced that stocks will receive a nice relief rally to begin the year.

The low CPC and CPCE say that the selling is likely not over. The SPX weekly chart is trying to bottom for a multi-week rally but the MACD line remains weak and bleak. Therefore, on a weekly basis, the S&P 500 likely wants to come down to test the recent lows again in that 2350-2450 area. This behavior over the coming days, say perhaps a week or two, jives with the lower put/calls. The SPX may want to flush lower before setting up for a multi-week run higher. It is likely prudent to not chase the upside after Friday's joyous rally. If you got caught up in the hype on the long side, stay patient and when the SPX drops in coming days you can scale-in to the long side with more buys. The SPX weekly chart hints at a multi-week rally is on tap but the S&P 500 may not bottom and begin this rally for another week or so. 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.