Extreme Trading

Seems to me that Wall Street now has entered the realm of ‘extreme trading’ – a new discipline that might actually make it into the next Olympics for we are setting new records on a daily basis now. A brave new world we live in indeed – but I have bitched enough over the last thirteen months and it’s getting old. Let’s just focus on the fact’s m’am…

After hearing that yesterday’s put/call ratio had dropped to 0.32 (a new record since the 2000 top) I took another look at my 10-day CPCE chart. First the long drop to 0.46 didn’t really fit into the overall pattern. Until I zoomed out a little that is – now it actually starts making complete sense. That trend line I have painted has only been touched a few times in the past two years – and every time it has a medium term drop was imminent.

Yes, I feel like sounding like a broken record but the charts are telling me to keep long positions to a minimum. Sometimes things take a while to play out – which makes sense, especially when you see irrational exuberance lift to new heights. Stay nimble and don’t buy into the frenzy. Yes, you look like an idiot right now but you’ll be among the few ones smiling once shit hits the fan in force.

The ramp up on this chart has been nothing but obscene. We are now right at the 78.6% fib line on the COMPQ. My question remains – who are you bulls going to sell your overvalued positions to? At some point we will run out of buyers – and after a ramp up like this how many buyers are left? I remain nimble and humble but charts like that scream bearish to me – something must be horribly wrong with my brain.

Otherwise I have nothing to add in terms of analysis – we are in record territory here and those are tough times to make predictions in. Let me go and look for some symbols – at least that’s something I feel more confident about.

UPDATE 2:11pm EDT: Okay, I lied – I have one more chart to share and it’s nothing but a whopper:

What you are looking at here is my genetically enhanced ISEE Equities 10-day SMA chart. It’s actually quite accurate in predicting turning points but that is beside the point right now (no pun intended). The salient piece of insanity here is the record reading of 240 which we touched two days ago and have remained at since. Folks – (sorry to sound like Denninger – LOL) – that is 20 handles higher than what we saw at the very top of the market when the SPX scraped 1565. If you ever needed a textbook example of bullish exuberance gone wild – here it is.

What happens next – well, I have some ideas but I’d be lying if I wasn’t nervous about shorting this market. However, I can’t look at a chart like this and not buy puts. But that’s me – I’m crazy like that – please don’t even think about doing what I do as you will most likely get burned – especially in this tape.

Cheers,

Mole