(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: 29.5%
VIX Status: 21.2
General (Short-term) Trading Call: Hold
Reference Charts (click for view of last 6 months from Stockcharts.com):
S&P 500 or SPY
SDS (ProShares UltraShort S&P500)
U.S. Dollar Index (volatility index)
VIX (volatility index)
VXX (iPath S&P 500 VIX Short-Term Futures ETN)
EWG (iShares MSCI Germany Index Fund)
CAT (Caterpillar)
Commentary
T2108 popped to 29.5% as the S&P 500 staged an impressive comeback from what at first looked like a follow-through to yesterday’s dangerous fade.
The VIX, the volatility index, initially popped with the morning’s sell-off but ended up fading back to the critical 21 support level. The VIX even cracked the level before bouncing back into the close.
So now we have another one of those critical setups for the coming week of trading. A close below 21 on the VIX needs to be quickly followed by a break below its 50DMA, now around 20, before I can get excited. Similarly, the S&P 500 needs to close above resistance at 1334 and then has even stiffer resistance waiting at the declining 50DMA at 1357. I get a little more excited with closes above these resistance levels, ever mindful of T2108 of course.
For now, T2108 does not help us make any directional assessment. It is important to know that it is bouncing off its second oversold period in the last six weeks or so (short-term bullish), but the technical levels discussed above will loom even more important. The biggest wildcard is Spain which is in the process of asking its eurozone friends for a massive bailout of its banks. Financial markets could soar with relief as if this marks the end of the crisis or markets could tank on fear that this event marks a dangerous new turn in a worsening crisis. As always I am leaving emotions out of it and watching the technical responses. It will still be very important to keep an eye on currency markets for clues.
The short-term trading bias remains a “hold” until we get resolution one way or another. If T2108 goes back to oversold, I will fret over the 20DMA all over again.
Daily T2108 vs the S&P 500
Black line: T2108 (measured on the right); Green line: S&P 500 (for comparative purposes)
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 VXX calls