(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: 47% and neutral.
VIX Status: 17 (closed below last oversold period).
General (Short-term) Trading Call: Hold.
Commentary
T2108 soared again, closing today at 47% and a high for June. The S&P 500 closed with a 0.8% gain and is now just 9 points below its 50DMA. The index remains well below its high for June but the divergence with T2108 continues to suggest that momentum will favor more near-term gains for the S&P 500. The current sharp bounce has featured strong closes.The VIX (volatility index) closed well below levels from the last oversold period. There is a lot of confirmation here of a bullish bias. While the short-term trading call remains a hold, short-term traders should have already taken some profits by now in order to remain comfortable with the increasing risks of holding bullish trading positions.
I closed out my puts on VXX as it fell 5% along with the 10% drop in the VIX. Given this experience, I am now going to focus on buying VXX puts during oversold periods. As a reminder, I am looking to simplify the overbought/oversold trades to focus on index plays. SSO remains the index of choice for bearish bets (puts).
Finally, I will slowly increase my September puts on SSO into whatever remains of this rally. This is not strictly a call on T2108, so I did not include it in the trading call above. Instead, I am warily looking at the S&P 500’s upper resistance levels, the downtrend from the May peak, and an expectation that the market has a high likelihood of experiencing another sharp pullback in July or August. If T2108 gets back to overbought levels (at the current rate, T2108 will be overbought by early next week), I will get particularly aggressive with bearish bets.
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, long VXX puts