CPC Put/Call Ratio Daily Chart Signals Significant Market Top

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The put/call ratio's hits keep on coming. The fearlessness is rampant on Wall Street right now. The holiday eggnog is likely fueling this uber optimism even further. Well, the hangover is not far away. The low put/call ratio drama's continue for both the CPCE and CPC. The last bear in the market closed shop late last week and took the last Greyhound bus out of town on the weekend. There are only bulls remaining, now worshiping the golden bull idol, with a Caligula-style pre-holiday orgy. There is no wall of worry the markets climb but instead, a wall of Fed. No one is concerned about any market downside ever occurring again because of the Fed's support, the BOJ destroying the yen and the obscene buybacks courtesy of the Fed's easy money policies.

All good things come to an end. You know the schpeal. All longs that you are not willing to own for a few years should be tossed overboard. The short side is in vogue here forward. If you do not want to play the short side, simply sit in cash for a month or two and see what happens. Finish your long shopping list and once the CPC moves up towards 1.20 you can start to nibble on the long side again. Until then stay away from the long side. The low CPC says markets are placing a significant top right now. A drop in the SPX of 50, 100, perhaps many more handles, is on tap moving forward. It will be interesting to see if Santa arrives today to begin the Santa rally into the new year, or, the sled runs out of gas. 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 4:34 PM:  Guess where the CPC closes on Christmas Eve? 0.60. You have to love it. Not only did the last bear leave town a few days ago, even any family members and distant relatives have now left as well. There are only buyers remaining. When you look around wondering who the next fool is, and no one wants to receive the hand off, you realize its you. CPCE equity put/call ratio drops to 0.46. Complete and rampant complacency and lack of fear in markets. The Fed has trained everyone to not worry, be happy. The festive atmosphere suggests a permanently high plateau is now in place, perhaps reminiscent of Irving Fisher's remark in the late 1920's?

XJY Japanese Yen Daily Chart Oversold Falling Wedge Positive Divergence

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This chart has been in focus waiting for the weaker yen to bottom out. These lows in the yen are occurring with very attractive positive divergence (green lines) that is setting up a bounce move higher. The weaker yen this year, beaten down by the BOJ, is the major cause of the Japan and U.S. stock market upside, along with the Fed pumping (the central bankers are the market) and stock buybacks funded by the ZIRP Forever policy. The exact October low in the SPX at 1650-ish occurs in concert with the 103.5 print in the yen (neon blue circle). The BOJ bludgeons the yen lower, causing the dollar/yen currency pair to jump through 100, then 101, 102, this morning at 104.75 teasing 105. The 2014 predictions by Wall Street analysts and traders are already calling for a dollar/yen at 125 which would be in conjunction with the XJY continuing to fall through 90, 80, 70.... They will be surprised when the XJY moves more flat to up, and the dollar/yen likely drops back under 100 in 2014 heading lower towards 90.

The chart shows a bounce on tap so the stronger yen would prohibit the dollar/yen from reaching 105. As the yen bounces and recovers, Japan and U.S. stocks will sell off, the opposite of what has occurred over the last 3 months. The drop in the yen from 103.5 to 95.5 is about -8%. This would equate to about 130 SPX handles off the 1650 October bottom yielding 1780. The SPX blew up through this level so chalk the further SPX upside to the recent announcements of further blue chip buyback programs, as well as Fed pumping and Yellen optimism. The XJY weekly chart is positively diverged as well but will likely want to come back down for a test or two of the current levels as the weeks move forward. Thus, the projection is a bounce occurring any day forward in the yen, which will send the dollar/yen down towards 104 and lower, and send the NIKK, DXJ and U.S. stocks lower, but the BOJ will attempt to beat the yen lower again in January or February to drive the XJY lower again. Big picture, perhaps 90% or more of traders expect a much weaker yen this year and lots of further upside in the Nikkei and Japan exporters and auto manufacturers. They will likely be disappointed and instead see a flat sideways move. 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.