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The CPC is a short-term, contrary indicator. It compares the action in call options<\/a> to the action in put options<\/a>. A reading above 1.20 shows extreme bearishness among speculators and can indicate a good time to buy stocks for the short term. A reading below 0.80 shows extreme bullishness and could indicate a good time to sell.<\/p>\n The CPC dipped below 0.80 in early December – right before the S&P 500 dropped 450 points in three weeks. The ratio dipped below 0.80 again in late December – after a blistering week-long rally that flipped investor sentiment from extremely bearish to extremely bullish.<\/p>\n The S&P 500 dropped a quick 50 points in just two days after that.<\/p>\n We looked at this indicator in mid-February<\/a>, when the CPC dropped to 0.78. The S&P fell only 25 points following that signal. That’s not much of a move (just about 1% or so). But, for traders looking to make quick gains, a 1% move in two days is a pretty good payout.<\/p>\n The CPC then dipped below 0.80 again at the end of February, just before the S&P sold off 60 points in just a few trading days.<\/p>\n Yesterday, the CPC closed at 0.77 again. At a minimum, the market is due for a pause right here. And the “worst case” could be a whole lot more damaging.<\/p>\n Like I said earlier, it’s hard to be bearish or even just cautious right here. But, for the very short term, it’s probably dangerous to be too bullish.<\/p>\n Best regards and good trading,<\/p>\n Jeff Clark<\/p>\n P.S. <\/strong>As you folks already know, some days, there simply isn’t much action in the market. Other days, the market goes nuts. And right now, it’s hard to be bearish or even just cautious.<\/p>\n That’s why I play a game most guys on Wall Street don’t. My trading philosophy in the Delta Report<\/em><\/a> is more about reducing risk than it is about always swinging for the fences, even if that looks tempting.<\/p>\n But reducing risk doesn’t take big profits out of the equation…<\/p>\n![](\"https:\/\/casey-assets.s3.amazonaws.com\/images\/misc\/jeff-clark-signature.png\")
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