{"id":10662,"date":"2012-03-21T05:12:15","date_gmt":"2012-03-21T09:12:15","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=10662"},"modified":"2012-03-21T05:17:34","modified_gmt":"2012-03-21T09:17:34","slug":"t2108-update-120320","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2012\/03\/21\/t2108-update-120320\/","title":{"rendered":"T2108 Update &#8211; March 20, 2012 (Near-term Upside Potential Is Increasing?!?)"},"content":{"rendered":"<p>(T2108 measures the percentage of stocks trading above their respective 40-day moving averages [DMAs]. To learn more about it, see my <a href=\"http:\/\/www.drduru.com\/money\/T2108.htm\">T2108 Resource Page<\/a>. You can <a href=\"http:\/\/twitter.com\/#!\/search\/%23T2108\">follow real-time T2108 commentary<\/a> on twitter using the #T2108 hashtag. T2108-related trades and other trades are posted on twitter using the #120trade hashtag)<\/p>\n<p><strong>T2108 Status<\/strong>: 59%<br \/>\n<strong>VIX Status<\/strong>: 15.6%<br \/>\n<strong>General (Short-term) Trading Call<\/strong>: Hold with a bullish bias<\/p>\n<p><strong>Reference Charts<\/strong> (click for view of last 6 months from Stockcharts.com):<br \/>\n<a href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=$SPX&#038;p=D&#038;st=2011-09-20&#038;en=2012-03-20&#038;id=p14085208538\" title=\"6-month chart of the S&#038;P 500\" target=\"_blank\">S&#038;P 500<\/a> or <a href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=SPY&#038;p=D&#038;st=2011-09-20&#038;en=2012-03-20&#038;id=p14085208538\" title=\"6-month chart of SPY\" target=\"_blank\">SPY<\/a><br \/>\n<a href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=SDS&#038;p=D&#038;st=2011-09-20&#038;en=2012-03-20&#038;id=p15880085697\" title=\"6-month chart of SDS\" target=\"_blank\">SDS<\/a> (ProShares UltraShort S&#038;P500)<br \/>\n<a href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=$USD&#038;p=D&#038;st=2011-09-20&#038;en=2012-03-20&#038;id=p25615696567\" title=\"6-month chart of the U.S. dollar\" target=\"_blank\">U.S. Dollar Index<\/a> (volatility index)<br \/>\n<a href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=$VIX&#038;p=D&#038;st=2011-09-20&#038;en=2012-03-20&#038;id=p25615696567\" title=\"6-month chart of the VIX\" target=\"_blank\">VIX<\/a> (volatility index)<br \/>\n<a href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=VXX&#038;p=D&#038;st=2011-09-20&#038;en=2012-03-20&#038;id=p15880085697\" title=\"6-month chart of VXX\" target=\"_blank\">VXX<\/a> (iPath S&#038;P 500 VIX Short-Term Futures ETN)<br \/>\n<a href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=EWG&#038;p=D&#038;st=2011-09-20&#038;en=2012-03-20&#038;id=p15880085697\" title=\"6-month chart of EWG\" target=\"_blank\">EWG<\/a> (iShares MSCI Germany Index Fund)<\/p>\n<p><strong>Commentary<\/strong><br \/>\nTwo strange things happened Tuesday: 1) T2108 fell again even as the S&#038;P 500 remained just a few points away from multi-year highs, 2) VXX, the volatility (VIX) ETN, fell significantly again (on high volume) even as the VIX gained slightly.<\/p>\n<p>Ever since <a href=\"http:\/\/drduru.com\/onetwentytwo\/2012\/03\/06\/t2108-update-120305\/\" target=\"_blank\">T2108 finally fell from historic overbought conditions on March 5<\/a>, the S&#038;P 500 has GAINED 3.0%. T2108 has spent just one extra day in overbought conditions over the two subsequent weeks. Until Tuesday, the S&#038;P 500 GAINED every single day after that 1-day overbought period ended. I consider all this behavior further confirmation of the continuing bullish bias in the market. With T2108 now at 59%, there is plenty of headroom for another return to overbought conditions, not to mention another extended stay as T2108&#8217;s history suggests is likely to happen.<\/p>\n<p>Tuesday delivered the morning drop in the S&#038;P 50 that I was hoping for on Monday. Per current strategy, I targeted a low point for loading up on SSO call options. I thought the S&#038;P 500 might actually reach a 1% loss, but downward momentum soon ended. Once I made that assessment I bought 40% of the SSO calls I wanted and left an order for the remaining 60% at my lower offer. The S&#038;P 500 never looked back for the rest of the day. Here is a 15-minute chart of SSO:<\/p>\n<p><center><br \/>\n<figure id=\"attachment_10665\" aria-describedby=\"caption-attachment-10665\" style=\"width: 490px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/03\/120320_SSO.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/03\/120320_SSO.png\" alt=\"The intraday bullish bias of the S&amp;P 500 on display\" title=\"The intraday bullish bias of the S&amp;P 500 on display\" width=\"500\" height=\"350\" class=\"size-full wp-image-10665\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/03\/120320_SSO.png 500w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/03\/120320_SSO-300x210.png 300w\" sizes=\"auto, (max-width: 500px) 100vw, 500px\" \/><\/a><figcaption id=\"caption-attachment-10665\" class=\"wp-caption-text\">The intraday bullish bias of the S&P 500 on display<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>Note well how little time I had to decide to settle for a higher than desired price on the SSO calls. Although I paid more than I wanted, the weekly Mar 23 &#8217;12 $58 calls finished the day 25% higher, making me of course grateful I stuck by the strategy to buy *something* on the dip. I will likely sell these calls on Wednesday given the Friday expiration. Moreover, stochastics on the S&#038;P 500 have flipped firmly overbought making this trade all the more risky or at least tricky. (Recall that in trending markets, stochastics can stay overbought\/oversold for extended periods of time).<\/p>\n<p>Before I move on to VXX, I want to flag Caterpillar (CAT) as the suspicious character in a room full of bulls. CAT closed down over 2%, finishing the day on top of its 50DMA support on strong selling volume. The stock&#8217;s rally now looks increasingly exhausted to me. It failed miserably to re-challenge its all-time highs even as the S&#038;P 500 continued to motor upward. I am taking it off my select list of stocks to buy on dips. In fact, it probably makes sense to aggressively short CAT, particularly as a hedge against other bullish positions. CAT must retake the $114 level to invalidate my growing bearish bias toward it.<\/p>\n<p><center><br \/>\n<figure id=\"attachment_10667\" aria-describedby=\"caption-attachment-10667\" style=\"width: 490px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/03\/120320_CAT.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/03\/120320_CAT.png\" alt=\"CAT&#039;s valiant effort to hold 50DMA support looks less convincing now\" title=\"CAT&#039;s valiant effort to hold 50DMA support looks less convincing now\" width=\"500\" height=\"350\" class=\"size-full wp-image-10667\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/03\/120320_CAT.png 500w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/03\/120320_CAT-300x210.png 300w\" sizes=\"auto, (max-width: 500px) 100vw, 500px\" \/><\/a><figcaption id=\"caption-attachment-10667\" class=\"wp-caption-text\">CAT&#039;s valiant effort to hold 50DMA support looks less convincing now<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>I sold my latest round of puts on VXX as it hit fresh all-time lows at $20. VXX went on to lose over 6% on its way to an all-time low of $19.32. My profits from VXX puts are barely keeping up with the losses on the shares. Anyone trying to use VXX to hedge passively or even profit from a major sell-off must be increasingly questioning the decision. I am not sure how much lower VXX needs to go before a climactic (and temporary) bottom gets carved, but it could take a while as <a href=\"http:\/\/drduru.com\/onetwentytwo\/2012\/03\/18\/t2108-update-120316\/\" target=\"_blank\">a LOT of money has crammed into VXX lately<\/a>. A lot of heads are likely getting scratched as VXX&#8217;s big losses are occurring even as the VIX stabilizes with slight gains. This behavior is a stark reminder of the near uselessness of VXX as a way to play the VIX when it is not trending (strongly) upward. I am assuming that VXX is losing out to a sharp contango condition as its caretakers frantically roll-over volatility futures. For more on this destructive dynamic read &#8220;<a href=\"http:\/\/www.indexuniverse.com\/sections\/features\/11183-volatility-etfs-often-own-all-vix-futures.html?fullart=1&#038;start=4\" target=\"_blank\">Volatility ETFs Often Own All VIX Futures<\/a>.&#8221; Per current strategy, I will be looking to reload on puts on the next pop in VXX. I will wash, rinse, and repeat as long as VXX keeps sliding on its vicious downtrend. The VXX shares only remain on the books as a &#8220;just in case&#8221; something crazy happens overnight. VXX, along with SDS, is still enabling me to maintain the conviction to trade aggressively with call options on SSO and certain individual stocks.<\/p>\n<p><center><br \/>\n<em>Charts below are the <strong>latest<\/strong> snapshots of T2108 (and the S&#038;P 500)<\/em><br \/>\nRefresh browser if the charts are the same as the last T2108 update.<br \/>\n<\/p>\n<p><strong>Daily T2108 vs the S&#038;P 500<\/strong><br \/>\n<a href=\"http:\/\/www.drduru.com\/money\/charts\/T2108-daily_s.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/www.drduru.com\/money\/charts\/T2108-daily_s.png\" width=\"500\" height=\"350\" alt=\"T2108 vs. the S&#038;P 500 (DAILY)\" title=\"T2108 vs. the S&#038;P 500 (DAILY)\"><\/a><\/p>\n<p>Black line: T2108 (measured on the right); Green line: S&#038;P 500 (for comparative purposes)<br \/>\n<\/center><\/p>\n<p><center><br \/>\n<strong>Weekly T2108<\/strong><br \/>\n<a href=\"http:\/\/www.drduru.com\/money\/charts\/T2108-weekly_s.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/www.drduru.com\/money\/charts\/T2108-weekly_s.png\" width=\"500\" height=\"350\" alt=\"Weekly T2108\" title=\"Weekly T2108\"><br \/>\n*<strong>All charts created using <a href=\"http:\/\/www.freestockcharts.com\/\" title=\"Freestockcharts.com\" target=\"_blank\">freestockcharts.com<\/a><\/strong> unless otherwise stated<\/a><br \/>\n<\/center><\/p>\n<p><strong>Related links:<\/strong><br \/>\n<a href=\"http:\/\/www.drduru.com\/money\/T2108.htm\">The T2108 Resource Page<\/a><br \/>\n<a href=\"http:\/\/www.drduru.com\/money\/charts\/T2108-daily.jpg\">Expanded daily chart of T2108 versus the S&#038;P 500<\/a><br \/>\n<a href=\"http:\/\/www.drduru.com\/money\/charts\/T2108-weekly.jpg\">Expanded weekly chart of T2108 <\/a><\/p>\n<p>Be careful out there!<\/p>\n<p>Full disclosure: long SDS and VXX; long CAT calls; long SSO calls<\/p>\n","protected":false},"excerpt":{"rendered":"<p>(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: 59% VIX Status: 15.6% &#8230; <a title=\"T2108 Update &#8211; March 20, 2012 (Near-term Upside Potential Is Increasing?!?)\" class=\"read-more\" href=\"https:\/\/drduru.com\/onetwentytwo\/2012\/03\/21\/t2108-update-120320\/\">Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[135,62],"tags":[65,446,226,1597],"class_list":["post-10662","post","type-post","status-publish","format-standard","hentry","category-stock-market-trading","category-technical-analysis","tag-sp-500","tag-sso","tag-t2108","tag-technical-analysis"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>T2108 Update - March 20, 2012 (Near-term Upside Potential Is Increasing?!?) - ONE-TWENTY TWO: Trading Financial Markets<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/drduru.com\/onetwentytwo\/2012\/03\/21\/t2108-update-120320\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"T2108 Update - March 20, 2012 (Near-term Upside Potential Is Increasing?!?) - ONE-TWENTY TWO: Trading Financial Markets\" \/>\n<meta property=\"og:description\" content=\"(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: 59% VIX Status: 15.6% ... 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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: 59% VIX Status: 15.6% ... 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