{"id":10736,"date":"2012-03-27T02:41:44","date_gmt":"2012-03-27T06:41:44","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=10736"},"modified":"2012-03-27T02:41:44","modified_gmt":"2012-03-27T06:41:44","slug":"t2108-update-120326","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2012\/03\/27\/t2108-update-120326\/","title":{"rendered":"T2108 Update &#8211; March 26, 2012 (All Systems Go On the Follow-Through)"},"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>: 62%<br \/>\n<strong>VIX Status<\/strong>: 14.3%<br \/>\n<strong>General (Short-term) Trading Call<\/strong>: Hold with a bullish bias<br \/>\n<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=$SPX&#038;p=D&#038;st=2011-09-26&#038;en=2012-03-26&#038;id=p14085208538\" title=\"6-month chart of the S&#038;P 500\" target=\"_blank\">S&#038;P 500<\/a> or <a href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=SPY&#038;p=D&#038;st=2011-09-26&#038;en=2012-03-26&#038;id=p14085208538\" title=\"6-month chart of SPY\" target=\"_blank\">SPY<\/a><br \/>\n<a href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=SDS&#038;p=D&#038;st=2011-09-26&#038;en=2012-03-26&#038;id=p15880085697\" title=\"6-month chart of SDS\" target=\"_blank\">SDS<\/a> (ProShares UltraShort S&#038;P500)<br \/>\n<a href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=$USD&#038;p=D&#038;st=2011-09-26&#038;en=2012-03-26&#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=2011-09-26&#038;en=2012-03-26&#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=2011-09-26&#038;en=2012-03-26&#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=2011-09-26&#038;en=2012-03-26&#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 \/>\nSo much for wiping out the gains from <a href=\"http:\/\/drduru.com\/onetwentytwo\/2012\/03\/14\/t2108-update-120313\/\" target=\"_blank\">the S&#038;P 500&#8217;s big breakout on March 13th<\/a>. In <a href=\"http:\/\/drduru.com\/onetwentytwo\/2012\/03\/23\/t2108-update-120322\/\" target=\"_blank\">my last update<\/a>, I gave the bearish case its due just for the sake of completeness. That case is now far in the rearview mirror for now. Today, the S&#038;P 500 printed an important confirmation and follow-through to the current bullish trend. With T2108 still below overbought levels at 62%, the major index is still &#8220;all systems go.&#8221;<\/p>\n<p><center><br \/>\n<figure id=\"attachment_10737\" aria-describedby=\"caption-attachment-10737\" style=\"width: 490px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/03\/120326_SP500.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/03\/120326_SP500.png\" alt=\"All systems go for the S&amp;P 500\" title=\"All systems go for the S&amp;P 500\" width=\"500\" height=\"350\" class=\"size-full wp-image-10737\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/03\/120326_SP500.png 500w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/03\/120326_SP500-300x210.png 300w\" sizes=\"auto, (max-width: 500px) 100vw, 500px\" \/><\/a><figcaption id=\"caption-attachment-10737\" class=\"wp-caption-text\">All systems go for the S&P 500<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>Incredibly, a LOT has happened in just two trading days. I will summarize the T2108-related action by describing the trades I made and their rationale and\/or context (you can follow the timeline with<a href=\"https:\/\/twitter.com\/#!\/search\/%23120trade\" target=\"_blank\"> my #120trade hashtag in twitter<\/a>).<\/p>\n<p><strong>Bought FXP (ProShares UltraShort FTSE\/Xinhua China 25 ETF) shares<\/strong><br \/>\nIn <a href=\"http:\/\/drduru.com\/onetwentytwo\/2012\/03\/23\/t2108-update-120322\" target=\"_blank\">the last T2108 update<\/a>, I put FXI, an ETF of 25 large cap Chinese stocks, on my bearish list given a new 2-month low. I bought FXP, the inverse of FXI. While this position naturally moved against me today, I realized that FXP is a great hedge given it seems China may likely produce the next source of market angst. If so, FXP should deliver some cushion against the blow. FXI remains below its 200DMA.<\/p>\n<p><strong>Missed doubling down on more SSO weekly calls<\/strong><br \/>\nOnce again, I failed to get aggressive enough&#8230;even as I believe I am shaking all lingering bearish doubts from my trading finger. I lowballed my offer despite the calls losing as much as 33% of their value at Friday&#8217;s lows. The chart below shows how little time I had to decide to accumulate. If I had managed to execute, those calls would have delivered about a 120% gain when I decided to sell my SSO calls into Monday&#8217;s open. Instead, I gathered a 58% gain on the first tranche of SSO calls. I did decide to hold onto my April SSO calls. As a reminder, my strong bullish bias has the short-term horizon of a swing trader (1 to 3 days), so weekly calls typically serve my purpose as a cheaper way to buy the dips. The longer-dated SSO calls are added firepower against the SDS hedge.<\/p>\n<p><center><br \/>\n<figure id=\"attachment_10738\" aria-describedby=\"caption-attachment-10738\" style=\"width: 490px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/03\/120326_SP500-daily.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/03\/120326_SP500-daily.png\" alt=\"The S&amp;P 500 makes a sharp turn after Thursday&#039;s dip at the open\" title=\"The S&amp;P 500 makes a sharp turn after Thursday&#039;s dip at the open\" width=\"500\" height=\"350\" class=\"size-full wp-image-10738\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/03\/120326_SP500-daily.png 500w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/03\/120326_SP500-daily-300x210.png 300w\" sizes=\"auto, (max-width: 500px) 100vw, 500px\" \/><\/a><figcaption id=\"caption-attachment-10738\" class=\"wp-caption-text\">The S&P 500 makes a sharp turn after Thursday&#039;s dip at the open<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p><strong>Closed out BBY &#8220;catch-up play&#8221;<\/strong><br \/>\nFor more information on this trade and my analysis of the coming earnings play in BBY see &#8220;<a href=\"http:\/\/seekingalpha.com\/article\/456611-how-to-assess-best-buy-s-post-earnings-potential\" target=\"_blank\">How To Assess Best Buy&#8217;s Post-Earnings Potential<\/a>.&#8221;<\/p>\n<p><strong>Ended the torture of holding VXX shares<\/strong><br \/>\nNothing has been more destructive to my performance than VXX shares. I finally gave myself MAJOR relief by unloading them on Friday. I simply could not trade VXX puts fast enough to keep up with VXX&#8217;s losses. I replaced the shares with April calls that I am holding as &#8220;just in case&#8221; we wake up one morning to something truly crazy. I suspect there are still way too many bears that are doubling and tripling down on VXX waiting for just that magical (Black swan) moment. I married the calls to even more puts, the better risk\/reward bet for now. Those puts soared in value at Monday&#8217;s open as VXX quickly fell another 6% to fresh all-time lows. I happily sold them. VXX ended the day down over 9%. This thing got so ugly, I decided near the close to apply some of my profits from the March weekly puts into buying out-of-the-money April puts. VXX&#8217;s chart exclaims 1000 words and death by 2000 cuts.<\/p>\n<p><center><br \/>\n<figure id=\"attachment_10740\" aria-describedby=\"caption-attachment-10740\" style=\"width: 490px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/03\/120326_VXX.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/03\/120326_VXX.png\" alt=\"The VXX deathmarch\" title=\"The VXX deathmarch\" width=\"500\" height=\"350\" class=\"size-full wp-image-10740\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/03\/120326_VXX.png 500w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/03\/120326_VXX-300x210.png 300w\" sizes=\"auto, (max-width: 500px) 100vw, 500px\" \/><\/a><figcaption id=\"caption-attachment-10740\" class=\"wp-caption-text\">The VXX deathmarch<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p><strong>Back into the euro-plays with Siemens (SI)<\/strong><br \/>\nThe euro-plays get me the most excited right now. They are more in my contrarian comfort zone whereas the bullish plays on the S&#038;P 500 are all about trend-following. With Europe rallying overnight, I checked in on Siemens (SI) to see how far it had popped. To my surprise, Siemens was flat. For comparison, EWG, the Germany ETF, closed the day up a cool 2.2%. SI is still directly below critical resistance so I am taking a larger risk than usual, but I feel it is worth the shot with EWG looking ready to launch to fresh 8-month highs. I consider Siemens a classic &#8220;catch-up&#8221; stock as it will be a natural play for anyone wanting to participate in a European recovery. I started with calls. If Siemens manages to drop below $90 or so, I will begin accumulating shares to hold for the longer haul.<\/p>\n<p><strong>What now?<\/strong><br \/>\nWith the S&#038;P 500 at fresh multi-year highs, it seems crazy to maintain such a bullish bias, yet, the data told me to do it. While I suspect tomorrow&#8217;s open will make me wish I still had all my SSO calls and original collection of VXX puts, I will stay focused on the current strategy of buying whatever dips the market presents and then selling into the next rally. I continue to expect a lot of churn with a slight upward bias that produces numerous bullish trading opportunities, including shifts in and out of overbought territory. Last week&#8217;s dip was a PERFECT example of what I talked about earlier as part of my expectations: the continued frustration of bears as selling lacks the critical follow-through to break down the S&#038;P 500. This week&#8217;s open printed an exclamation point as the S&#038;P 500 recaptured ALL of last week&#8217;s losses in a flash. That impressive move occurred on decent (meaning average) trading volume. This follow-through and fresh breakout must thus be respected and given its due&#8230;<\/p>\n<p>When T2108 next hits overbought territory, I hope to re-examine the data supporting the bullish case. Until then, stay nimble and keep an open mind.<\/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 FXP; long SSO and SI calls; long VXX calls and puts<\/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: 62% VIX Status: 14.3% &#8230; <a title=\"T2108 Update &#8211; March 26, 2012 (All Systems Go On the Follow-Through)\" class=\"read-more\" href=\"https:\/\/drduru.com\/onetwentytwo\/2012\/03\/27\/t2108-update-120326\/\">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":[482,4,794,387,43,135,62],"tags":[935,939,177,938,65,577,576,446,226,1597,178,120],"class_list":["post-10736","post","type-post","status-publish","format-standard","hentry","category-breakout","category-china","category-europe","category-germany","category-industrial-sector","category-stock-market-trading","category-technical-analysis","tag-fxi","tag-fxp","tag-ipath-sp-500-vix-short-term-futures","tag-ishares-xinhua-25-index-fund-etf","tag-sp-500","tag-si","tag-siemens-aktien","tag-sso","tag-t2108","tag-technical-analysis","tag-volatility","tag-vxx"],"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 26, 2012 (All Systems Go On the Follow-Through) - 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\/27\/t2108-update-120326\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"T2108 Update - March 26, 2012 (All Systems Go On the Follow-Through) - 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: 62% VIX Status: 14.3% ... 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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: 62% VIX Status: 14.3% ... 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