{"id":16842,"date":"2013-02-18T01:58:16","date_gmt":"2013-02-18T09:58:16","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=16842"},"modified":"2013-02-18T01:58:16","modified_gmt":"2013-02-18T09:58:16","slug":"t2108-update-130215","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2013\/02\/18\/t2108-update-130215\/","title":{"rendered":"T2108 Update (February 15, 2013) – Like Last Year, An Anti-Climactic End to An Extreme Overbought Period"},"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>: 69.0% (ending 31 days of overbought conditions)
\nVIX Status<\/strong>: 12.5
\nGeneral (Short-term) Trading Call<\/strong>: See below.<\/p>\n

Reference Charts<\/strong> (click for view of last 6 months from Stockcharts.com):
\nS&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>
\n2012 began with a bang and generated a stubborn overbought period that lasted for an historic 43 days, the seventh longest on record since at least 1986. That overbought period ended in an anti-climactic fashion with no sell-off or steep plunge<\/a>. The maximum and net returns were 7.6% and 6.8%, respectively. This year’s start with an extreme overbought period was not quite as historic, lasting 31 days, but it too ended in anti-climactic fashion. The S&P 500 sits essentially at 5+ year highs, the VIX has managed to trade back DOWN to SIX year lows, and on-balance volume (OBV) is at levels last seen in mid-March of 2012. The maximum and net returns for this last overbought period are essentially the same at 6.7% and 6.6% respectively.<\/p>\n


\n
\"You<\/a>
You can't tell that a 31-day overbought period just ended!<\/figcaption><\/figure>
\n
\n
\"The<\/a>
The VIX has dropped to an incredible 7-year low: "wake me when something happens"<\/figcaption><\/figure>
\n<\/center><\/p>\n

What followed the end of last year’s overbought rally unfolded relatively close to the script I laid out at the time based on historical analysis:<\/p>\n