(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: 69%.
VIX Status: 17.5.
General (Short-term) Trading Call: Hold. Continue identifying new shorts.
Commentary
OK. Now the stock market is teasing and tantalizing us. T2108 closed at 69% for a second day, a hair below the 70% threshold that places the market in overbought territory. Moreover, the abandoned baby top on the index is still holding firm as resistance (this ominous technical pattern occurred at the July top on the 8th of the month).
I think aggressive traders can declare the current T2108 “close enough” and feel comfortable opening fresh shorts here with a stop set at the top of the abandoned baby pattern – 135.70 on SPY where the pattern is clear. You can think of the July highs on the S&P 500 has the main test for that index.
If instead you decide to wait for an official T2108 overbought reading, you might as well also wait to see whether the stock market can CLOSE with news highs for the month. Otherwise, if T2108 fades from here, shorting below Friday’s low could provide another point of entry.
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 puts on SSO, long SDS