CPC Put/Call Ratio and SPX S&P 500 Daily Charts; Complacency Versus Panic and Fear

The vulnerable human condition is always on display in the stock market. The constant battle of fear and panic versus complacency and fearlessness. The put/call ratios measure these human emotions and as expected the opposite outcome occurs.

Keystone posted the CPC and CPCE put/call ratio charts a week or two ago and told you not to buy long until you see panic and fear. Did you listen or were you a naughty boy or girl? Did the greed play on your mind and the fear of missing out on an entry point for a big rally ahead? Did you hit the buy button only to have your head handed to you on a platter? Yes, you did, and you deserved it. You saw that traders were off the charts complacent so why were you stupid and buying stocks on the long side?

In December, Timmy Trader could no longer handle the pressure from client phone calls panicking at the drop in stocks and wondering what to do. He was losing money hand over fist so he ran to the window and to the horror of everyone on the floor, jumped out. Fortunately, he was on the ground floor.

The CPC is at 1.11 finally moving higher in recent days and the long one-month of complacency and fearlessness about stocks never selling off again may be abating. A sure sign of more downside and a top is when television pundits exclaim that everyone is too bearish; these folks are always wrong and great fades (do the opposite of what they suggest and you will make more money).

The folks waxing negativity about stocks are buying stocks. They are not buying puts for protection instead buying calls out the wazoo greedily expecting a big upside move in the stock market and some more quick money. The boat is/was fully-loaded to the bull side as the low put/calls verify everyone partying and having fun, buying stocks by throwing darts at the stock pages on a dartboard, life is easy with stocks going up forever. You know what happens when everyone is bullish and complacent.

Stocks top out on Groundhog Day, 2/2/23, with the rodent predicting 6 more weeks of selling; he is correct so far. Stocks retreat due to the complacency but as the CPC shows, a lot more negativity is needed to create panic and fear and an attractive buying opportunity. If short, the charts tell you to stick it out a few more days since more negativity is likely. If long, you will likely be hammered until the panic and fear can arrive and place a bottom in the stock market.

There should be lots of excitement in the week ahead. The CPCE put/call ratio is the same dealio as the CPC above. You do not want to buy until you see people running out of the stock exchange with their hair on fire swearing to never own a stock again. Step up and gladly take their shares as you buy and walk towards the burning building while they run away in panic. When the markets are complacent, you gladly sell and handover your shares to the sucka's begging to buy stocks that are caught up in the fearless frenzy and then you go short.

As a side note, UTIL (Dow Jones Utilities; DJU) lost the 927 level last week a critical failure placing the stock market into a crash profile. The 927 is meaningless in the week ahead replaced with 939. If UTIL cannot regain 939, starting the week at 928, it is lights out going forward for US stocks. You will experience carnage if long. If UTIL regains 939, the long stockholders will receive a slight reprieve. 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.