(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: 25% and neutral.
VIX Status: 20; reversed gains from the last day of last oversold period.
General (Short-term) Trading Call: Hold.
Commentary
T2108 rose slightly to 25% on another lackluster trading day. I am suspecting that the market wants to put on a “good show” for the Federal Reserve’s meeting on Wednesday morning to remind the voting members just how much the stock market needs and deserves another round of quantitative easing. Remember how it seemed the market’s sell-off would worsen just in time for every Fed meeting when Greenspan was busy cutting rates after the tech bubble burst?
Anyway, this two-day bounce out of the oversold period has been unimpressive (and I am NOT just saying that because my favorite oversold plays, Apple {AAPL} and Google {GOOG}, have been duds so far!). I am seeing some stark dichotomy in performance across industries and sectors. For example, AAPL’s ominously poor relative performance out of the oversold period stands in stark contrast to the nice 3% move in Caterpillar (CAT). Or the 5% gain for First Solar (FSLR) versus the 4% loss for Trina Solar (4%). This behavior makes it much harder to pick potential winners and losers for these short-term trades. I may need to stick to the indices until I can understand better what may be happening.
The Fed’s jawboning on Wednesday is a large wildcard, but if our favorite currency crushers do not dish out the goods the market wants, I am expecting stocks to plunge very quickly back into oversold territory. I am shopping puts (and some shorts) in some of the poorer performing speculative stocks, especially in tech.
Charts below are the latest snapshots of T2108 (and the S&P 500)
Refresh browser if the charts are the same as the last T2108 update.
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, AAPL call, GOOG calls, FSLR, and TSL