T2108 Update – August 22, 2011

(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. You can follow real-time T2108 commentary on twitter using the #T2108 hashtag.)

T2108 Status: 14% (Day #13 of the current oversold period).
VIX Status: 42
General (Short-term) Trading Call: Only add to bullish positions on dips. Hold any remaining bearish positions as small hedges. See below for new modifications.

Commentary

After a strange Friday, Monday’s trading ended the day at a stalemate. The gap down that I feared never happened as the S&P 500 opened the day up and rallied quickly over 1%. However, sellers were once again very effective in pressing prices back down. The S&P 500 ended essentially flat as did T2108 and the VIX. Interestingly, VXX rallied from a gap down to a 3% gain on the day.

Overall, nothing much to report as every anxious trader and investor, bullish or bearish, anxiously watches the 2011 lows. The buyers still have a LOT to prove.

Finally, note that this oversold period is now as long as the 13-day run in 1990. Only 5 other oversold periods have lasted longer: 1987, 2008 (3 times) and 2009. The increasingly extreme nature of this oversold period continues to convince me that whenever a surge upward occurs, it will be massive. The trick is to stay in the game long enough to benefit. (On Friday, I posted new rules crafted for this juncture).


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
T2108 vs. the S&P 500 (DAILY)

Black line: T2108 (measured on the right); Red line: S&P 500 (for comparative purposes)


Weekly T2108
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 shares and calls on SSO, long VXX puts, long AMZN put

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