{"id":13332,"date":"2012-08-08T01:21:58","date_gmt":"2012-08-08T08:21:58","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=13332"},"modified":"2012-08-08T01:21:58","modified_gmt":"2012-08-08T08:21:58","slug":"t2108-update-120807","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2012\/08\/08\/t2108-update-120807\/","title":{"rendered":"T2108 Update (August 7, 2012) &#8211; Critical Juncture: Overbought, 2012 Highs, and the Australian Dollar"},"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 <a href=\"http:\/\/twitter.com\/#!\/search\/%23120trade\" target=\"_blank\">the #120trade hashtag<\/a>)<\/p>\n<p><strong>T2108 Status<\/strong>: 76.4% (third day of FOURTH overbought period in six weeks)<br \/>\n<strong>VIX Status<\/strong>: 16.0<br \/>\n<strong>General (Short-term) Trading Call<\/strong>: Accumulate or initiate fresh bearish position<\/p>\n<p><strong>Reference Charts<\/strong> (click for view of last 6 months from Stockcharts.com):<\/p>\n<p><a href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=$SPX&#038;p=D&#038;st=2012-02-07&#038;en=2012-08-07&#038;id=p14085208538\" title=\"6-month chart of the S&#038;P 500\" target=\"_blank\">S&#038;P 500<\/a> or <a href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=SPY&#038;p=D&#038;st=2012-02-07&#038;en=2012-08-07&#038;id=p14085208538\" title=\"6-month chart of SPY\" target=\"_blank\">SPY<\/a><br \/>\n<a href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=SDS&#038;p=D&#038;st=2012-02-07&#038;en=2012-08-07&#038;id=p15880085697\" title=\"6-month chart of SDS\" target=\"_blank\">SDS<\/a> (ProShares UltraShort S&#038;P500)<br \/>\n<a href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=$USD&#038;p=D&#038;st=2012-02-07&#038;en=2012-08-07&#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=2012-02-07&#038;en=2012-08-07&#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=2012-02-07&#038;en=2012-08-07&#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=2012-02-07&#038;en=2012-08-07&#038;id=p15880085697\" title=\"6-month chart of EWG\" target=\"_blank\">EWG<\/a> (iShares MSCI Germany Index Fund)<br \/>\n<a href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=CAT&#038;p=D&#038;st=2012-02-07&#038;en=2012-08-07&#038;id=p15880085697\" title=\"6-month chart of CAT\" target=\"_blank\">CAT<\/a> (Caterpillar)<\/p>\n<p><strong>Commentary<\/strong><br \/>\nThe overbought rally continued for a third day as T2108 trickled up to 76 and the S&#038;P 500 gained 0.5%. The index got within 8 points of retesting the May intraday high. The high of the day retested the May closing high.<\/p>\n<p><center><br \/>\n<figure id=\"attachment_13336\" aria-describedby=\"caption-attachment-13336\" style=\"width: 490px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/08\/120807_SP500.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/08\/120807_SP500.png\" alt=\"The S&amp;P 500 creeps its way into resistance\" title=\"The S&amp;P 500 creeps its way into resistance\" width=\"500\" height=\"350\" class=\"size-full wp-image-13336\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/08\/120807_SP500.png 500w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/08\/120807_SP500-300x210.png 300w\" sizes=\"auto, (max-width: 500px) 100vw, 500px\" \/><\/a><figcaption id=\"caption-attachment-13336\" class=\"wp-caption-text\">The S&P 500 creeps its way into resistance<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>This is about the time the S&#038;P 500 has found a reason to cool off for a few days, and I have been looking for reasons to launch my T2108 rules to open new bearish positions. On Monday, overbought day #2, I finally found that reason in the form of an Australian dollar (FXA) fading intra-day. I bought a first tranche of puts in SSO. The S&#038;P 500 followed with a very weak close, losing most gains. On Tuesday, I found more reason to get bearish and bought a second tranche of SSO puts as the Australian dollar faded most of the day. I tweeted the following sequence over the course of the day:<\/p>\n<blockquote><p>&#8220;Bearish divergence on $AUDUSD vs $SPY. Rally not getting confirmed.&#8221;<\/p>\n<p>&#8220;Intraday bearish divergence btwn $AUDUSD and $SPY getting even stronger. Expecting $SPY selling into close heavier than yesterday. We&#8217;ll see&#8221;<\/p>\n<p>&#8220;$AUDUSD does it again. While $SPY did not hit a new low of the day, it did fade all gains from the open. VERY cautious on Wed open.&#8221;<\/p><\/blockquote>\n<p>I wrote about caution on Wednesday&#8217;s open because I expected follow-through on Aussie weakness. At the time of writing, that is not panning out. Here is an intra-day chart of the trading on Tuesday that demonstrates the bearish divergence I observed. Also note how the S&#038;P 500 gave up most of its gains in the wake of AUD\/USD weakness. <\/p>\n<p><center><br \/>\n<figure id=\"attachment_13338\" aria-describedby=\"caption-attachment-13338\" style=\"width: 490px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/08\/120807_SP500vsAUDUSD.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/08\/120807_SP500vsAUDUSD.png\" alt=\"The Australian dollar provides a leading signal for the S&amp;P 500 yet again\" title=\"The Australian dollar provides a leading signal for the S&amp;P 500 yet again\" width=\"500\" height=\"350\" class=\"size-full wp-image-13338\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/08\/120807_SP500vsAUDUSD.png 500w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/08\/120807_SP500vsAUDUSD-300x210.png 300w\" sizes=\"auto, (max-width: 500px) 100vw, 500px\" \/><\/a><figcaption id=\"caption-attachment-13338\" class=\"wp-caption-text\">The Australian dollar provides a leading signal for the S&P 500 yet again<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>I have written about the valuable relationship between AUD\/USD and the S&#038;P 500 in several other pieces; for example, see &#8220;<a href=\"http:\/\/seekingalpha.com\/article\/741601-another-key-bullish-divergence-between-the-australian-dollar-and-the-s-p-500\" target=\"_blank\">Another Key Bullish Divergence Between The Australian Dollar And The S&#038;P 500<\/a>.&#8221; At some point, these correlations will not work or outright fail as conditions change. For now, I maintain close vigilance on an intra-day and daily level. The S&#038;P 500&#8217;s challenge of key resistance levels also present a key test of this relationship with the Australian dollar. <\/p>\n<p><strong>Daily T2108 vs the S&#038;P 500<\/strong><br \/>\nClick chart for extended view with S&#038;P 500 fully scaled vertically (updated at least once a week)<br \/>\n<a href=\"http:\/\/www.drduru.com\/money\/charts\/T2108-daily_extended.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; long SSO puts; long VXX shares, calls, and puts; short VXX calls; short AUD\/USD<\/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: 76.4% (third day of &#8230; <a title=\"T2108 Update (August 7, 2012) &#8211; Critical Juncture: Overbought, 2012 Highs, and the Australian Dollar\" class=\"read-more\" href=\"https:\/\/drduru.com\/onetwentytwo\/2012\/08\/08\/t2108-update-120807\/\">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":[20,135,62],"tags":[308,310,998,65,226,1597],"class_list":["post-13332","post","type-post","status-publish","format-standard","hentry","category-forex","category-stock-market-trading","category-technical-analysis","tag-audusd","tag-australian-dollar","tag-correlations","tag-sp-500","tag-t2108","tag-technical-analysis"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.5 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>T2108 Update (August 7, 2012) - Critical Juncture: Overbought, 2012 Highs, and the Australian Dollar - 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\/08\/08\/t2108-update-120807\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"T2108 Update (August 7, 2012) - Critical Juncture: Overbought, 2012 Highs, and the Australian Dollar - 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: 76.4% (third day of ... 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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: 76.4% (third day of ... 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