CPC and CPCE Put/Call Ratios and SPX S&P 500 Daily Charts

The stock market remains on a wild roller coaster ride. Market participants crossed into the fear and panic zone last week so you knew a relief rally was on the come. The milktoast jobs report provided that boost. The Fed will continue cutting rates so stocks took off higher like a moon shot smoking all the shorts. Equities ran higher as the short-covering rally gathered steam.

The complacency and lack of fear was highlighted as September began and a top was expected which occurred. The little red rectangles are useful for calling tops while the little green boxes are useful in calling bottoms.

As a rule of thumb for the CPC, the stock market euphoria is too out of control and optimistic below 0.80 so you want to go short. When the CPC rises above 1.20, traders are in panic jumping out of windows so that is when you want to go long. The crowd is always wrong.

For the CPCE put/call ratio, the stock market joy and bullishness is out of control below 0.55 so you want to go short. Conversely, the market negativity is rampant above 0.80 so it is a good time to go long.

Well, the question always is, "Now what, Einstein?" Both the May and June selloffs were month-long affairs and note that the first breach into panic and fear was not the last during these retreats in stocks. The put/calls came back up again before the firm bottom was placed; and everyone likes firm bottoms.

The SPX price drop through the 50-day MA and subsequent recovery back above is the same exact behavior as the prior two fractals shown in the blue squares. In May and August, price then reversed again losing the 50 again and then placing a matching or lower low in price in a few days or week or two's time. Will this trend repeat a third time?

Those 21-day MA's for the put/call's are sloping higher and not yet leveled off where you would be more comfortable calling a firm bottom. Thus, there would be more expectation for selling ahead and perhaps a lower low at 2880 or lower in a few days time.

Of course, the Fed can talk dovishly at anytime which will pump equities higher and keep rewarding the wealthy class in America. Or, President Trump may tout happy times with the US-China trade negotiations which will also pump stocks higher.

If there is some weakness in stocks, it may occur out of the gate Monday and early and mid-week. Monday, 10/14/19, is Columbus Day and the bond market will be closed but the stock market will be open. Stocks may be buoyant on Thursday and Friday this week with the holiday on tap (even though the stock market will not be closed on Monday). The full moon is next Sunday and stocks are typically positive through the full moon each month. OpEx is next week so the move in stocks from Tuesday, 10/15/19, into Wednesday is typically higher. Thus, the seasonality is on the bull side say from Thursday into the following week. The bears will need extra negativity to overcome the bullish seasonal positivity mid-month.

Boiling down all this mumbo-jumbo and simply looking at the S&P 500 chart above, watch SPX 2942. The bulls win above and the bears win below. The SPX is at 2952 with the bulls singing songs and throwing confetti. 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.

Note Added Tuesday Morning, 10/8/19, at 5:59 AM EST: The SPX ends the Monday session at 2939 sitting on the 50-day MA support. Of course it does. The S&P 500 has to make a bounce or die decision from the 50 today.