Here I've analyzed the PCCE (Put/Call Ratio Equities) in the monthly time frame.
Something extremely concerning is taking place for the coming months. We are close to hitting .45 on the put/call ratio which is in extremely overbought territory. What this means is when we are in this level, all of the buying power in the market is already in the market. We need to blow off steam before we can continue higher. Typically we can expect extreme volatility in the coming months after the ratio gets to this level. I've marked out historic times where price got to this level to add clarity to the chart.
We've already sold off 10% in September when we almost touched. Now we are lower and can possibly touch .45 this month, if that does. Cash may gain value.
Excellent analysis. I'll have to put my head into the 0.45 PCRE to clarify it a bit more on my end. Great tool. With the current double-tripple tops all over the market, we may be in another bubble ready to burst. Likewise, I'm also in cash (almost entirely). It drives me nuts to see the market currently going up again but I stick to the plan. Buying opps are, I think, mostly behind us.
jakelikesstocks
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@LeLaf, Mostly cash for me too. I have a little bit in renewable energy companies, but that's about it! Whoever got into BTC over the past months, man... Lol.
Also it is frustrating to see the market going up like this with no stimulus, covid cases rising, and the contested election, but it could possibly be from market participants covering their shorts. If that's the case, watch out.
LeLaf
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@jakelikesstocks, Yeah. I saw BTC and invested in it through QBTC.U on the canadian market. Made a ton of money. My bet is BTSUSD will reverse between now and 19-20k mark. Watching from the sidelines now.
LeLaf
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@jakelikesstocks, Speaking of wich, BTCUSD is crashing today. Not looking good for the markets this coming week.
jakelikesstocks
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@LeLaf, Wow, thanks for pointing that out. I want to chart that now. BTC for the long term so it will be fun.
MikeandIke
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@jakelikesstocks, At the end of the day when the giants driving the US economy are publishing positive financial reports, why would you expect something different?
Even if all of the buying power is in the market the fed will keep on stimulating how do you think that will affect your thesis?
jakelikesstocks
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@gavin_st, That's a great question. To address this we need to look closer at the SPY 4hr chart.
During the Fed meeting, we saw the bulls take a run at the high of the day for the second time but they needed to break 352.5 and test 351.4 as support. The issue the bulls were fighting technically happened to be 3 confluent resistance levels and was unfortunately too much for them.
The other unfortunate thing for the bulls right now is we are adding strength to that triangle resistance and that could head out for a couple months with a huge break out if that pattern is true, could be either to the up or downside.
Of course, that could change with huge news updates.
As for the 6-month volatility that this chart suggests, there have been several times in history where we have had a positive correlation of the VIX and SPY. Several years of 200+ days of positive correlation, so it's even possible that we go up with volatility. I don't know if that's likely, but if we do that then I would expect us to establish a new range for the PCCE maybe around .35 - .4. Question is for how long would we and what would the after effects of that be.
All of this is just my interpterion of what I see and is not a recommendation to long or short any position. You should just use this to support or dispute your original thesis.