T2108 Update – Setback Confirmed

T2108 Status: 80.6%
T2107 Status: 32.2%
VIX Status: 18.7
General (Short-term) Trading Call: cautiously bullish
Active T2108 periods: Day #18 over 20%, Day #17 over 30%, Day #14 over 40%, Day #11 over 50%, Day #7 over 60%, Day #6 over 70%, Day #4 over 80% (overbought)

Commentary
In the last T2108 Update I described a synchronous failure of market leaders. These same leaders followed-up with an attempted rally that fizzled across the board with all closing the day flat. The S&P 500 could not hold flat and instead lost 1.1%.

The S&P 500 closes down for the first time in March.

The volatility index, the VIX, gained for the third straight day. I had previously expected a rendezvous with the old 15.35 pivot. Instead, the VIX may have another rally to go before sinking that low again.

The volatility index is trying to sustain a rebound from recent lows.

T2108, the percentage of stocks trading above their respective 40-day moving averages (DMAs), fell along with the market. It closed at 80.6%. This is only the fourth loss since the February 11 low at oversold conditions. The decline in T2107, the percentage of stocks trading above their respective 200DMAs, fell for only the third day since February 11th’s low. The decline from 35.7% to 32.2% was significant and confirms the market’s first notable setback in this bounce from oversold conditions.

I am keeping the trading call at “cautiously bullish.” Recall that I am not flipping bearish until the S&P 500 (SPY) falls below and follows through its selling below its 50DMA AND after T2108 has fallen from overbought conditions. If T2107 shows significant weakness, I could pull the trigger on bearishness a little earlier.

Speculative stocks were particularly hard hit. These are stocks that have enjoyed out-sized gains in this rally; membership has been dominated by commodity-related stocks. For example, Cliffs Natural Resources Inc (CLF) plunged 20.7% and fell back under its 200DMA.