About today’s trick, I have no idea if it still works or not because some commented before that during the 2009 bull market, a 70% plus winning rate for predicting an up day the next day is nothing which I partially agree. But the trick was originated in 2008 bear market, so it’s still hard to say if it works or not. Anyway, whether it works or not, I don’t care, as I’ve explained in the weekend’s report, the purpose of this quick summary is to provide you with some information, it doesn’t represent my view of the market which are usually no better than clueless.
When CPC <= 0.81, 41 out of 59 times (69%), a green day the next day.
The story about CPC < 0.8 was originated in 2008 when I found interestingly whenever CPC < 0.8, the market would soon skyrocketed high for a few days and then fell to the ground hard which I named it as a “firework” trading setup. Some old readers should remember this.
The setup evolved into more complex one in 2009 bull market but gradually became meaningless because in most cases the market simply was up and up, there’s no bullish setup needed anymore. And that’s why I didn’t bother to mention it anymore.
The purpose I’m telling this story is to let you know the option market behavior today was very strange. Contrary to what says in many books, the put call ratio is actually a leading indicator, a sudden drop in put call ratio like we saw today may mean big guys know some good news ahead of our retailers and are preparing for the celebration. So bears be careful here, although personally, I don’t trade on such kind of story or speculation but it’s no harm to be prepared.
