T2108 Update – Retail Fails The Test As The S&P 500 Mildly Stares At Its Own

T2108 Status: 57.6%
T2107 Status: 26.2%
VIX Status: 18.0
General (Short-term) Trading Call: Neutral (target of 1996 on the S&P 500 occurred ahead of overbought conditions. See “From the Edge of A Breakout to the Ledge of A Breakdown” for more details).
Active T2108 periods: Day #9 over 20%, Day #8 over 30%, Day #8 over 40%, Day #6 over 50% (overperiod), Day #2 under 60%, Day #323 under 70%

Reference Charts (click for view of last 6 months from Stockcharts.com):
S&P 500 or SPY
SDS (ProShares UltraShort S&P500)
U.S. Dollar Index (volatility index)
EEM (iShares MSCI Emerging Markets)
VIX (volatility index)
VXX (iPath S&P 500 VIX Short-Term Futures ETN)
EWG (iShares MSCI Germany Index Fund)
CAT (Caterpillar).
IBB (iShares Nasdaq Biotechnology).

Commentary
T2108 faded further away from overbought conditions. The third pullback in a row accompanied the S&P 500 (SPY) down to an early test of the 50DMA as support.

The S&P 500 (SPY) has drifted back to its 50DMA

While the 50DMA test looks mild, it is important. The S&P 500 topped out at the September intraday high and thus has yet to completely heal from the oversold periods that began in the August angst. A breakdown here opens the potential for yet another trip to oversold conditions. A successful test would setup a run-up to 200DMA resistance which SHOULD finally create overbought conditions. It could be a very close call…like the Pittsburgh Steelers going for the win instead of the tie against the San Diego Chargers on Monday Night Football and getting rewarded as running back Le’Veon Bell stretches at the final tick of the game for the winning touchdown.

It was a day of earnings news that featured at least two stark contrasts. Intel (INTC) dropped as much as 3.7% in the morning, and I began contemplating my first post-earnings buy perhaps around a 50DMA test. Before I could think a second thought, INTC jumped back up to a 1.5% gain on its way to a remarkable +2.4% gain. Suddenly, INTC has successfully defended the 200DMA as support and looks ready to resume its breakout.