CPC and CPCE Put/Call Ratios and SPX S&P 500 Daily Charts; Top Watch Continues

It has been an interesting month since the low put/call ratios initially registered for the CPC. The red circles show stock market tops occurring after traders and investors become wildly optimistic, complacent, fearless, relaxed, and off-the charts bullish about the stock market. The put/calls are a contrarian indicator. High CPC and CPCE numbers indicate rampant fear and panic and an excellent buying opportunity.

Once the low CPC put/calls occur in early November, the CPCE is monitored and it has room to come down still yet (so you are thinking that a top is coming but not ready to short yet). Once you know complacency is afoot, you focus on the minute, hourly and daily charts to figure out where the top is at. The CPCE prints the uber low number in concert with the CPCE dipping slightly to that 0.85 level, so a top should be at hand. Looking at the hourly and daily charts it is all systems go for the top (due to negative divergence), and it occurs, however, if you blinked you missed it.

It was the tiny pullback mid-November of only about 35 SPX handles. Happy trade talk and central banker stimulus news keep saving the stock market day after day. So stocks bottom and rally exactly when the panic and fear was touched on the CPC chart. Note that the CPCE is not even close to its panic and fear level for almost 2 months.

Stocks rally into the Friday, 11/29/19, top and remain set up for the top due to negative divergence on the SPX hourly and daily charts, and the top occurs. This drop is about 80 points which tests that thick blue support level at 3070-ish. At that point, as would be expected, Soybean Donny runs to a microphone and announces that a US-China trade deal is progressing swimmingly. Stocks rally placing the gap-up moves. The blue circles show gaps that will need filled at some point in the future.

Stocks rally strongly after the Friday, 12/6/19, jobs report, but not due to the strong 266K jobs number but rather the one-tick miss in wages (on-month; the on-year number was a one-tick beat but remaining at a paltry 3.1%) and the ongoing lack of wage growth. Inflation cannot exist without wage inflation. This is the losing battle the Federal Reserve faces for the last 11 years with their obscene Keynesian money-printing experiment that has only served to make the wealthy class super filthy rich. Such is the corrupt crony capitalism system.

The lack of wage growth means low inflation will remain for an extended period so stocks rally big since central banker easy money will continue forever. The central bankers are the market. Have you finally realized this or are you still stupid?

So the charts want a pullback but the Soybean Donny happy trade talk and Federal Reserve and other central banker money-printing maintain elevated stock prices. Interestingly, the US plans to raise tariffs on Chinese goods 12/15/19 which is Sunday only 5 days away. President Trump has to make a decision this week on the trade deal and obviously this will have a great impact on markets.

The stock market has likely priced-in a US-China trade deal and not only for ag products but language addressing the IP theft problem and enforcement mechanisms. This may be a bridge too far. If King Donny agrees to a deal and it is viewed as weak, stocks will be in big trouble. Watch copper this week since it will tell you how the trade deal is going. China has drawn a line in the sand saying it wants tariff relief, not more tariffs, to make a deal.

At the same time this week, the Fed begins a 2-day meeting Tuesday with Chairman Powell's rate decision and press conference on tap Wednesday afternoon. This may be a milk toast event with no major moves or news expected by Pope Powell. The more important central bank meeting may be the next day, Thursday, when President Lagarde will swim into power as head of the European Central Bank and provide policy direction. Stocks are usually bullish into the Fed meetings.

The trade deal has many parts and it is hard to see an agreement that will please markets. Soybean Donny continuously talks out of both sides of his mouth saying 8 weeks ago that the Phase One trade deal was done and it simply needed to have the i's dotted and t's crossed which will take a couple weeks. This turns out to be more fibs and half-truths, what-the-H*ll call them what they are; bullsh*t, lies and talking out of one's arse but, that's our Donny. Everything becomes entertainment in the bread and circus days.

So lots of excitement is in store this week with trade and the central banks, the two main movers of markets these days, providing updated information and decisions. Keybot the Quant is on the long side and tracking retail stocks as the main mover of stock market direction currently. Volatility, the VIX, is also key. So bulls want strong retail stocks, commodities and lower volatility this week and they will be fine. Bears need weaker retail stocks and commodities and higher volatility and they will growl. There are retail earnings on tap which will be key and on Friday the Retail Sales data is released.

The major indexes missed printing new all-time highs by a hair on Friday so it will be interesting to see if it occurs today. The NYA prints a new 52-week high but remains a hair below its all-time high.

So, the search for the Godot Top remains in play. The charts say down but Soybean Donny, Dictator Xi and Pope Powell want higher stock markets. Something should give this week. S&P futures are down a couple points about 2 hours before the opening bell for the Monday trading session. VIX 14.34. Copper +0.3%. 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.