Monday, June 1, 2020
CPCE Put/Call Ratio and SPX S&P 500 Daily Charts; Significant Top At Hand
The euphoric fun party in the stock market continues.It is fun to watch. Everyone milling around, happy as pigs in mud, sucking down Fed wine and ECB champagne with another case of the former coming next Wednesday, 6/10/20, and a few special bottles of the latter coming this Thursday morning, 6/4/20. Folks long the stock market are so happy now. They feel invincible. They do not realize that they are going to be cut off at the knees first, then lanced and then their heads lopped off, landing on a platter. It is likely not going to be pretty and display lots of carnage. Oh well, that's the way it goes.
The CPCE put/call ratio is back down to the lows from a few days ago. The complacency is off the charts signaling a significant top at hand. A -5% to -10% drop would not be surprising. The euphoric bullishness is evidenced by business media commentary each day. GS has reversed its somber call on stocks going forward now calling the all-clear for equities. All the bears have left town. The local costume rental store just put a sign in the window for a special on bear suits; no one wants them anymore. Yogi and Booboo flew off to Bermuda. Smokey the Bear is carried out head-first (on a stretcher) from the Big Board floor.
The seniors at the bingo parlor are bragging to one another that they now own the FAANG (FB, AAPL, AMZN, NFLX, GOOGL) stocks. Matilda, the bossy lady that refuses to be outdone by any of the other blue-haired gals, steps up onto a metal chair in her orthopedic tennis shoes and exclaims that she took her whole life savings and bot Apple stock. The hall went dead quiet then erupted into great applause. Everyone said that Matilda was always the smart one and all planned to buy more stock tomorrow.
It is a hoot for a technician to watch the price behavior now because markets are about to pull back, probably big-time, and few know it. The SPX turd is kept afloat by ongoing central banker money-printing promises, happy vaccine talk and happy Trump speak promising more goodies. Investors are ignoring the coronavirus (COVID-19), the little thing that has killed well over 100K Americans and counting.
Mr Floyd, a black man, is allegedly murdered by a white cop while in custody, and the video displays the dirty deed plain as day. Protests erupt into riots in many cities and around the world. Looters, which is anyone disadvantaged in the US, take advantage of the situation, to grab new electronics, flashy clothes, Nike sneakers, and everyday needs from dollar stores. They figure the elite privileged class has raped the country for all its worth so they better grab some while they can. The class war has begun. You ain't seen nuttin' yet. Ahh yes, the days of youth as a Teenage Anarchist. Life is interesting.
That initial pullback in May on a low put/call ratio gave up about 110 points so this coming selloff should be more than that. On the SPX daily, price should pull back to the 20-day MA at 2931 or 21-day MA down at 2926 (2920-2940) which is also price support. That would be a 130 points. Since the complacency is off the charts, traders need to be taught a lesson so a quick trip to test that prior low at 2820 is definitely on the table. That would be a 230-point flush lower. Now we are talking. Do not forget. We are in flash crash territory considering the fearlessness in stocks and elevated prices.
As the selling starts, it will be fun to watch the rats leaving the sinking ship. The SPX daily and 2-hour charts are good to go for the downside. The SPX 2-hour price comes back up for a double-top, or M-Top, almost, so it will be in neggie d in an hour or two after the Tuesday morning opening bell. It's ready. Simply push it off the cliff and it will fall far. As a professional technician, this is fun to watch. At anytime, all Hades should break loose in the stock market and thus, probably in the main stream news events as well. 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.