(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: 37%
VIX Status: 33
General (Short-term) Trading Call: Hold.
Commentary
T2108 is nearly unchanged from the last T2108 Update describing Thursday’s action. In between, T2108 hit 42%, an almost 2-month high, as buying momentum was strong all of last week. Today’s 1% drop in the S&P 500 could have been much worse given the index was off as much as 2% at one point. The selling ended 5 strong days in a row of buying right where we might have suspected: near the top of the current trading range and just below the 50DMA resistance. Bulls should be very encouraged that the sellers lost control of the lows with the market resting under such obvious resistance. This action makes me think that a breakout above the range will be sustained.
As a reminder, I don’t think the S&P 500 has much new to tell us until it breaks out above or below the existing range. Until then, I will refrain from doing much trading so as to avoid getting chopped up in the churn. For very aggressive bears and short-sellers, placing bets here with stops above the trading range make sense. However, T2108 neither supports nor rejects such a move.
My main hedge right now is a fistful of shares in VXX, the iPath S&P 500 VIX Short-Term Futures. The VIX remains stubborn as an ox with the 31 level holding firm for the third time in five weeks. We now must brace for a potential retest of the VIX’s upper trading range around 44.
Today’s action marked a definitive end to the “Euro-bounce” that I was playing with EWG, the iShares MSCI Germany index Fund ETF, and Siemens Atkins (SI). Both equities stopped cold at the declining 20DMA. I am obviously relieved that I sold SI last Thursday, but I am going to continue to hold EWG as planned. If the opportunity presents itself, I will buy SI again at lower prices. Note well that selling volume was much lower than recent buying volume, so bulls should feel encouraged once again.
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 shares and calls on SSO; long VXX shares, long EWG