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Fear, Complacency And Greed

6/10/2014 7:37:30 AM

Good morning Traders,

3 charts for you to ponder today.

As the saying goes, bulls make money, bears make money, but pigs get slaughtered. Too much of a good thing is greed, and unlike the mantra of wall street - greed is not good. Here's what I mean:

5-Day Equity Put/Call Ratio Chart

This spike higher in call buying, is generally associated with a top. And while tops can hang around for a month or more because of the mechanics of some hedging components manipulating prices, this level of complacency is at the greed level and traders will likely face the wrath of mother market.

That being said, these type of markets do present other opportunities. For example, one of our indicators (which are available at www.stockbarometer.com) is our oil leading indicator. It's not always precise, because of it's makeup, but it's message is clear - the potential for skyrocketing prices exists.

Oil Leading Indicator Chart

So it's a good thing that we loaded up on CALL OPTIONS in our Oil Options Trader Newsletter.

What's that mean for the markets? While no one can every call a top without paying some respect to randomness, here's our trading cycle chart, which we use in developing our annual forecast:

Trading Days Cycle 2013-2015 Chart

This is the first of a cluster of dates that are due up over the next few weeks. The key to the advance remains bonds, which if they turn lower from here, can fuel a liquidity advance. This money manipulation creates imbalances in the market that will get played out eventually - either gradually or sudden - you'll only know in hindsight. But our job here remains reviewing our research and looking for these tipping points and advising you and positioning you accordingly...as we've been doing for the past 14 years!



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