{"id":14600,"date":"2012-10-04T18:20:42","date_gmt":"2012-10-05T01:20:42","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=14600"},"modified":"2012-10-04T18:21:27","modified_gmt":"2012-10-05T01:21:27","slug":"t2108-update-121004","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2012\/10\/04\/t2108-update-121004\/","title":{"rendered":"T2108 Update (October 4, 2012) – S&P 500 Goes Overbought As It Breaks Out From Wedge"},"content":{"rendered":"

(T2108 measures the percentage of stocks trading above their respective 40-day moving averages [DMAs]. It helps to identify extremes in market sentiment that are highly likely to reverse. To learn more about it, see my T2108 Resource Page<\/a>. You can 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<\/a>)<\/p>\n

T2108 Status<\/strong>: 70.4%
\nVIX Status<\/strong>: 14.6
\nGeneral (Short-term) Trading Call<\/strong>: Hold<\/p>\n

Reference Charts<\/strong> (click for view of last 6 months from Stockcharts.com):<\/p>\n

S&P 500<\/a> or SPY<\/a>
\nSDS<\/a> (ProShares UltraShort S&P500)
\nU.S. Dollar Index<\/a> (volatility index)
\nVIX<\/a> (volatility index)
\nVXX<\/a> (iPath S&P 500 VIX Short-Term Futures ETN)
\nEWG<\/a> (iShares MSCI Germany Index Fund)
\nCAT<\/a> (Caterpillar)<\/p>\n

Commentary<\/strong>
\nThe S&P 500 made a bullish breakout from the wedge formation I have been following this week.<\/p>\n


\n
\"S&P<\/a>
S&P 500 breaks out of wedge formation<\/figcaption><\/figure>
\n<\/center><\/p>\n

This breakout is occurring directly ahead of tomorrow’s jobs report and suggests that the market is likely to react well to it. This breakout also means that the bearish divergence I noted yesterday between the S&P 500’s gains and T2108’s losses<\/a> are now null and void. Instead, the apparent bottoming in the Australian dollar (FXA) won the day. <\/p>\n

T2108 is right back in overbought territory, but I am not yet rolling out the standard T2108 trading rules. Typically at this time, I would recommend starting a bearish position. Instead, I am recommending holding onto bullish positions (in my case my remaining SSO calls) to allow the bullish formation to run its course. If the S&P 500 rallies strongly tomorrow, I will most likely sell these remaining calls. I am still avoiding going short until the bears prove they are breaking the market. I may consider a short position if T2108 gets to an extreme overbought position over 80%.<\/p>\n

Finally, I am not yet ready to reconsider using the extended overbought strategy because of earnings season and a whole host of negative reports and warnings that I have seen so far.<\/p>\n

Daily T2108 vs the S&P 500<\/strong>
\nClick chart for extended view with S&P 500 fully scaled vertically (updated at least once a week)
\n\"T2108<\/a><\/p>\n

Black line: T2108 (measured on the right); Green line: S&P 500 (for comparative purposes)
\n<\/center><\/p>\n


\nWeekly T2108<\/strong>
\n\"Weekly
\n*All charts created using freestockcharts.com<\/a><\/strong> unless otherwise stated<\/a>
\n<\/center><\/p>\n

Related links:<\/strong>
\nThe T2108 Resource Page<\/a>
\nExpanded daily chart of T2108 versus the S&P 500<\/a>
\nExpanded weekly chart of T2108 <\/a><\/p>\n

Be careful out there!<\/p>\n

Full disclosure: long SSO calls<\/p>\n","protected":false},"excerpt":{"rendered":"

(T2108 measures the percentage of stocks trading above their respective 40-day moving averages [DMAs]. It helps to identify extremes in market sentiment that are highly likely to reverse. 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 … 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":[65,226,1597],"class_list":["post-14600","post","type-post","status-publish","format-standard","hentry","category-stock-market-trading","category-technical-analysis","tag-sp-500","tag-t2108","tag-technical-analysis"],"yoast_head":"\nT2108 Update (October 4, 2012) - S&P 500 Goes Overbought As It Breaks Out From Wedge - 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\/10\/04\/t2108-update-121004\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"T2108 Update (October 4, 2012) - S&P 500 Goes Overbought As It Breaks Out From Wedge - 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]. 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