CPCE CBOE Options Put/Call Ratio Daily Chart; Record High Put/Call Indicates Rampant Panic and Fear in Markets

The CPCE put/call ratio is, well, off the charts at a record high. Traders and investors are buying puts like candy to protect their portfolios from, what they say is, a doom and gloom downside that is starting now. This is what Wall Street believes; down stocks from now into and during much of next year. The longer-term call is right. The US stock market will likely not bottom for a year or two.

In the near-term, however, considering the excessive panic, fear and negativity, stocks should rally. Everyone and his brother is fully loaded short. The Uber guy said he just went double-leveraged short. You also hear the chorus of negative comments from pundits and analysts on television expecting stocks to fall apart going forward. They are Scrooge's and Grinch's. The Federal Reserve decision is next Wednesday, 12/14/22, so that may be a wild card. It may be "a day that lives on in infamy," like Pearl Harbor Remembrance Day yesterday.

If you shorten the time frame on the CPCE chart to the last couple months, you can see the wild up and down swings over the last month. Panic and fear one day, a week later complacency, then a week later panic, then a week later complacency, then... you get the idea. The 1.46 is a big multi-decade record number.

The 1.46 means panic, angst, fear, worry, hand-wringing and excessive negativity about the stock market. The bulls have left town. There are only bears in the stock market now and each trader is bragging to the other about how many blocks they have short of what stock, index or ETF. Everyone is convinced that stocks will sell off going forward and their fear and angst is verified 100% by the chart above.

However, the put/call ratios are contrarian indicators. When everyone says the stock market will collapse, it never does. You want to run towards the burning building (buying stocks) when everyone else is running away screaming bloody murder (selling stocks). Over the coming days, as traders lose confidence that the downside in stocks is coming right away, they start to worry that short is the wrong trade. As they cover and buy stocks, more short players start throwing in the towel and an upside orgy occurs fueled by short-covering.

The coming days through the Fed meeting on hump day are going to be eventful. The SPX weekly chart is bullish, and the CPCE above is bullish, so Wall Street will likely be surprised at a strong rally continuing the move higher in stocks that started in October. 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 Saturday Morning, 12/10/22: The stock market remains soggy on Friday falling to the critical 3928-3933 confluence of support closing the week at 3934 so Monday is bounce or die time. Bulls win big on a bounce from 3933-3934. Bears win big if price collapses through 3928-3933. The put/call ratio wackiness continues. The CPCE drops to 0.70 and then bounces again ending the week at 0.96, call it one, remaining in the panic and fear zone. Traders and investors sold into the closing bell Friday because they are full of panic, fear, angst, worry and negativity believing that stocks will never go up again. What do you think will happen over the VST?