T2108 Update – November 10, 2011 (Yet Still Overbought)

(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-related trades and other trades are posted on twitter using the #120trade hashtag)

T2108 Status: 74% (fourteenth day of the overbought period)
VIX Status: 33
General (Short-term) Trading Call: Hold

Commentary
The S&P 500 gained 0.9% and helped T2108 to stay overbought by a hair. It bounced from 70% to 74%. So, the stock market’s ability to levitate in this overbought period has left the S&P 500 in another trading range; it has essentially gone nowhere over these 14 overbought days.

As a reminder, T2108 is well over the average and the median durations for an overbought period. 81% of all overbought periods have ended by 14 days; 88% by 19 days; and 94% by 25 days. Gains during overbought periods soar to 5% and above after about 25 days.

Volatility swiftly gave up much of yesterday’s gains. The VIX dropped 10%. It remains higher than I expected even with the S&P 500 poised to retest its 50DMA. It even looks like it will stay in or around its former trading range for a good amount of time.

Finally, all my “euro panic” plays managed to bounce nicely back above their respective 50DMAs: EWG (iShares MSCI Germany Index Fund), SI (Siemens), and DB (Deutsche Bank). I do not expect the bounces to last, but I am still planning to buy on a presumed resumption of selling in these stocks.

Weekly T2108

*All charts created using freestockcharts.com unless otherwise stated

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 SDS, long puts on VXX