Once Bitten Twice Shy

Yesterday, Fed blew away the hawkish expectations to smithereens.  Yellen acted like she just came out of a deep cave, and totally blew off any inflation fears that the Street had.  Obviously she doesn't want the Street to jump the gun and she gave no ammo for the bond vigilantes to move rates higher.  I am sure she didn't want to green light speculation in stocks as well, but that is one of the consequences of her desire to keep interest rates low.  And we got another all time high as a result.

It is a mug's game calling tops in a raging bull market.  But I will.  I am now calling for a short term top.  It doesn't mean I am shorting though.  I've gotten beaten up too many times going short ES.  Once bitten twice shy.  I am looking for a S&P proxy short, and the best I can come up with is shorting FXI, or China in general.  Yesterday, Shanghai got pummeled despite new all time highs in US indices.

Over the last couple of weeks, we have had a heavy dose of good news.  From Draghi's QE threats and negative deposit rates, and now with Yellen blind to inflation and denying there is a stock market bubble.  The green light has been given to speculate in stocks.  This has emboldened some traders to call out for big price targets, like 2000, 2050, 2100, etc over the coming months.  Although I do believe we will break 2000, I don't think it will be during the summer.

The low equity put/call ratios are flashing warning signs to me.  Yesterday, we got a CBOE put/call of 0.38.  That is historically one of the lowest daily readings.  Same low put/call ratio at the ISE.  I usually don't care about put/call ratios unless they are at true extremes.  Now we have finally gotten to a true extreme.