The stock market rarely rewards the popular opinion. So, whenever the CPC reaches extreme levels, it’s often profitable to bet on a reversal in the other direction. Indeed, using the CPC as a contrary indicator has paid off quite well over the past two years.<\/p>\n
Over the past month, though… not so much.<\/p>\n
The CPC dipped below 0.80 several times over the past few weeks. Take a look…<\/p>\n
![\"\"](\"https:\/\/cdn.jeffclarktrader.com\/JMU\/images\/202001\/20200113-MM-01.png\")
<\/p>\n
This sort of condition ought to lead to at least a short-term pullback in the stock market. But, it hasn’t happened. The market just keeps powering higher.<\/p>\n
As I said, it’s rare for the market to reward the popular opinion. But, that’s what’s happening.
\nBuying call options is paying off.<\/p>\n
This same sort of thing happened back in January 2018. Folks may recall that as another period when stock prices just kept pressing higher day after day.<\/p>\n
The market was melting up. And, traders were buying call options into that action.<\/p>\n
Here’s how the CPC looked back then…<\/p>\n
![\"\"](\"https:\/\/cdn.jeffclarktrader.com\/JMU\/images\/202001\/20200113-MM-02.png\")
<\/p>\n
The cluster of arrows in January of 2018 looks remarkably similar to the cluster of arrows on the chart today. So, it might be useful to take a look at how the S&P 500 performed in February 2018 to get some clues as to what might happen in the weeks ahead.<\/p>\n
Look at this chart of the S&P 500…<\/p>\n
![\"\"](\"https:\/\/cdn.jeffclarktrader.com\/JMU\/images\/202001\/20200113-MM-03.png\")
<\/p>\n
The relentless move higher in January 2018 was followed by an even more powerful decline. The S&P 500 lost about 12% in less than two weeks. So, while the individual “sell signals” from the put\/call ratio didn’t pay off immediately, the cluster of sell signals warned of an impending strong decline.<\/p>\n
The stock market action today sure looks similar to the action back in January 2018. And, the cluster of sell signals from the CPC looks similar as well.<\/p>\n
None of the recent sell signals have paid off yet. That has lots of folks wondering if the CPC is no longer a useful
\nindicator.<\/p>\n
Of course, many folks thought that back in January 2018 as well.<\/p>\n
Traders shouldn’t be too quick to dismiss the CPC. It may be warning of something more dramatic than a simple, short-term decline.<\/p>\n
Best regards and good trading,<\/p>\n
![](\"https:\/\/casey-assets.s3.amazonaws.com\/images\/misc\/jeff-clark-signature.png\")
<\/p>\n
Jeff Clark<\/p>\n
Reader Mailbag<\/strong><\/h2>\nToday, Delta Report<\/em> subscribers Harvey and Stephen thank Jeff for the value of the service…<\/p>\n\nAlmost all of the “thanks for your commitment to our financial lives” emails to you are well-deserved, and I am sure your efforts exceed those when you were trading in the past. I became a subscriber and that dedication led me to become a lifetime member. Thanks Jeff!<\/p>\n
– Harvey<\/strong><\/p>\n<\/blockquote>\n\nHi Jeff, I joined your service early last year and greatly appreciate all the advice and recommendations. I’m working from a smaller base, so my buys have been fairly small at 6-10 contracts. But, I recently paid for my lifetime subscription.<\/p>\n
\nAlmost all of the “thanks for your commitment to our financial lives” emails to you are well-deserved, and I am sure your efforts exceed those when you were trading in the past. I became a subscriber and that dedication led me to become a lifetime member. Thanks Jeff!<\/p>\n
– Harvey<\/strong><\/p>\n<\/blockquote>\n
\nHi Jeff, I joined your service early last year and greatly appreciate all the advice and recommendations. I’m working from a smaller base, so my buys have been fairly small at 6-10 contracts. But, I recently paid for my lifetime subscription.<\/p>\n