CPCE Put/Call Ratio and SPX S&P 500 Daily Charts; Sideways Symmetrical Triangle; Return to Complacency

On Friday, 10/11/19, President Trump announced the largest and best trade deal in the history of mankind that shot equities to the moon. The luster came off the US-China trade deal rose quickly, however, since there is nothing on paper; it is only a handshake with a communist. Soybean Donny says Dictator Xi plans to buy more ag products. It's all the same old stuff.

Comically, China's state-run media does not tout a big deal instead saying there is more work to be done. Trump always said he would not agree to anything except a big deal and it must address IP (intellectual property) theft and provide an enforcement mechanism. Apparently, none of that matters anymore; a skinny little deal still yet to be negotiated is good enough. King Donny simply wants to say he has a trade deal before his upcoming re-election bid in a year. China simply wants more food products because it has 1.4 billion mouths to feed. Food inflation, leading to riots and violence, has toppled many Chinese dynasties throughout history.

The S&P 500 exploded 32 points higher, +1.1%, to 2970 on the happy US-China trade deal news on Friday. The SPX gave back 23 points of upside into the closing bell once traders realized the deal is not written on paper. Monday morning futures are down -8 with the VIX above 16. International investors continue to sort out the potential US-China trade deal wondering if it is smoke and mirrors or if it has merit.

During the euphoric price action on Friday, traders were staggering around, drunk off the trade deal wine and Fed and ECB champagne, buying stocks with reckless abandon. Complacency and fearlessness quickly returned to the market. Investors and traders are not worried about stocks ever going down since the trade deal is getting solved and the Federal Reserve and other global central bankers plan on printing money forever. The CPCE collapses to 0.51.

The red circles show extreme complacency in the stock market. Of course, when the boat is fully loaded on the bull side, and the party is in full swing, that is when the market top occurs. It can take a day or few for the top to print but it is near as the 0.51 indicates. The CPC has not come all the way down as yet so maybe that is on tap for mid-week. Keep an eye on the CPC.

The past red circle tops resulted in the following point losses in the SPX; 200, 7, 40, 37, 70 and 120. Thus, the smallest pullback was only a handful of points but the largest drop was 2 hundo. The average pullback is about 80 points which would test the October lows. Throwing out the highest and lowest data points and averaging the remaining four, targets a drop of 67 SPX points.

The SPX is showing several potential sideways symmetrical triangle patterns (blue). Typically, a false break-out, or break-down, occurs about one-half to two-thirds of the way through the triangle, and you can see price was a break-out higher in September. Price then typically returns inside the triangle and will collapse out the other side. This did not occur but in fairness, just as price was ready to drop below the lower triangle trend line, King Donny ran to a microphone and said a US-China trade deal is on the way.

It was hilarious that the president pumped the stock market directly at 9:30 AM EST on Thursday morning just as the opening bell rang. What a joke it all is. Go Donny Go! It will be fascinating to see if the stock market holds up for the next 12 months into the election, or not. Trump has connected himself to the economy and stock market so his fortunes likely rise and fall with stocks, and he knows it. His wealthy-class donors funding his election campaign want ever-rising stock prices so he has to perform the bidding of his masters. Such is the crony capitalism system.

On Friday, the SPX once again breaks out to the upside on the trade news but is becoming soggy again since the trade deal appears not as great as the showman-in-chief touted. Stock market bulls need to break up through that top blue trend line to signal the all-clear for sustainable upside. Bears need the SPX to return to the inside of the triangle and collapse out the bottom.

The Keybot the Quant algorithm is long and tracking the VIX 16.00-ish level closely. The critical VIX 200-day MA is at 16.16. The VIX 16.00-16.16 level tells you the market direction story today. Bulls win big below 16 while bears win big above 16.16. The VIX is at 16.17 at 8:19 AM EST on Monday morning about one hour before the opening bell. S&P futures are -8. There you go, the battle is already ongoing. VIX 16.00-16.16 tells you everything you need to know; it is the bull-bear line in the sand. 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.