(T2108 measures the percentage of stocks trading above their respective 40-day moving averages [DMAs]. To learn more about it, see my T2108 Resource Page.)
T2108 Status: 46% and Neutral
General Trading Call: Cover some shorts.
Commentary
T2108 is just below April’s low of 47%. Given the S&P 500 is straddling critical support at the 50DMA (see below), I strongly suspect bulls are salivating to pick up some goods. This observation is behind my caution to cover a few shorts.
I cannot include “buy a few longs” in my trading call because the S&P 500 is still locked in a steep downtrend from the May multi-year highs. Any new trading longs may be good for a day or two at the most. In fact, I would suggest unloading longs into any subsequent bounce. I am expecting a break of today’s lows to lead to a rapid retest of April’s lows on the S&P 500 and a near oversold reading on T2108.
Once T2108 gets below 40% (my current expectation for this cycle), I will feel more confident about executing trading longs.
In this edition of Yahoo Finance’s Breakout, Jeff Macke pulls out his famous purple crayon to draw trendlines explaining his conclusion that rallies must be sold:
Macke’s Summary:
- Bulls are out of ammo
- Metals: Gold maybe; silver still dead
- Former leaders are falling
- Economy is in danger
- Consumer staples are still good
Charts below are the latest snapshots of T2108 (and the S&P 500)
Daily T2108 vs the S&P 500
Black line: T2108 (measured on the right); Red line: S&P 500 (for comparative purposes)
Weekly T2108
*All charts created using TeleChart:
Related links:
The T2108 Resource Page
Expanded daily chart of T2108 versus the S&P 500
Expanded weekly chart of T2108
Be careful out there!
Full disclosure: long SSO puts