(T2108 measures the percentage of stocks trading above their respective 40-day moving averages [DMAs]. It helps to identify extremes in market sentiment that are likely to reverse. To learn more about it, see my T2108 Resource Page. You can follow real-time T2108 commentary on twitter using the #T2108 hashtag. T2108-related trades and other trades are occasionally posted on twitter using the #120trade hashtag. T2107 measures the percentage of stocks trading above their respective 200DMAs)
T2108 Status: 15.2% (jump of 27.3%)
T2107 Status: 20.8%
VIX Status: 26.1 (down 16.9%)
General (Short-term) Trading Call: Bullish
Active T2108 periods: Day #9 below 20% (oversold), Day #10 under 30%, Day #33 under 40%, Day #73 under 50%, Day #90 under 60%, Day #288 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).
Commentary
I am writing this T2108 Update with a HEAVY dose of tentativeness. Just yesterday,sellers were able to extend this oversold period into historic territory, so I can only talk about bullish signs with a salt shaker on the table. While T2108 is once again within a stone’s throw of ending this oversold period with its close at 15.2%, I am very cognizant of the possibility for more churn ahead that could include a rapid return to oversold conditions.
On Wednesday, September 2, 2015, at least two measures of volatility printed what I interpret as major and important topping patterns.
The volatility index, the VIX, dropped out of the dangerzone. This second time left behind a clear topping pattern known as a spinning top; one could even call it an abandoned baby top. In this pattern, folks who chased volatility higher suddenly found themselves with instant losses the very next day. The pressure is now on them to decide whether to wait for a new surge or to bail quickly and limit losses.
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