The curious case of low VIX and high CPCE

Over the past days something interesting has happened. VIX has been dropping to levels that coincide with tops/continued upside, while CPCE (equities only put/call ratio) has been increasing to rather high readings, sometimes extreme (>0.90) that coincide with bottoms. See Figure below.

vix-cpceVIX hit our red support zone today and reversed, while CPCE was at a whopping 0.92 yesterday. Normally, as the red vertical lines show, readings over 0.90 coincide wit lows. That’s also when VIX is normally high (e.g. compare late-September 2015, mid- and late-December 2015, mid- and early January 2016). Question thus is, who’s wrong, and who’s right? Today it appears the CPCE was right. The lack of volatility/fear is certainly concerning, and the VIX’ MACD suggest a bullish base is forming as it is stair stepping higher (green circles).

Today’s CPCE reading remains elevated, but today less traders are bearish compared to yesterday. With the VIX’ setup will now the VIX be right?

Tomorrow we will review market breadth patterns to see what we can learn from prior readings. Stay tuned.

As you notice, Intelligent Investing tracks many lines of evidence to determine the market’s next big move, Elliot Wave, S/R, TIs and TAs are several of them. Holistic objective analysis allows us to be on the right side of the market more often than not, without any preconceived notion or opinion. We use just the facts. Just like we did here! Do you want to be on the right side too? Of course! Then please join us here.

 

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