{"id":17406,"date":"2013-04-08T20:13:25","date_gmt":"2013-04-09T03:13:25","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=17406"},"modified":"2013-04-08T20:31:19","modified_gmt":"2013-04-09T03:31:19","slug":"t2108-update-130408","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2013\/04\/08\/t2108-update-130408\/","title":{"rendered":"T2108 Update (April 8, 2013) &#8211; Post-Employment Losses Reversed, Bias to Neutral"},"content":{"rendered":"<p>(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 <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>: 52.5%<br \/>\n<strong>VIX Status<\/strong>: 13.2<br \/>\n<strong>General (Short-term) Trading Call<\/strong>: Sell SSO calls and then hold.<\/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=$SPX&#038;p=D&#038;st=2012-10-08&#038;en=2013-04-08&#038;id=p14085208538\" title=\"6-month chart of the S&#038;P 500\" target=\"_blank\">S&#038;P 500<\/a> or <a href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=SPY&#038;p=D&#038;st=2012-10-08&#038;en=2013-04-08&#038;id=p14085208538\" title=\"6-month chart of SPY\" target=\"_blank\">SPY<\/a><br \/>\n<a href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=SDS&#038;p=D&#038;st=2012-10-08&#038;en=2013-04-08&#038;id=p15880085697\" title=\"6-month chart of SDS\" target=\"_blank\">SDS<\/a> (ProShares UltraShort S&#038;P500)<br \/>\n<a href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=$USD&#038;p=D&#038;st=2012-10-08&#038;en=2013-04-08&#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=2012-10-08&#038;en=2013-04-08&#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=2012-10-08&#038;en=2013-04-08&#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=2012-10-08&#038;en=2013-04-08&#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=2012-10-08&#038;en=2013-04-08&#038;id=p15880085697\" title=\"6-month chart of CAT\" target=\"_blank\">CAT<\/a> (Caterpillar)<\/p>\n<p><strong>Commentary<\/strong><br \/>\nThe S&#038;P 500 (SPY) had a weak opening but ended very strong. The index maintained the upward bias that <a href=\"http:\/\/drduru.com\/onetwentytwo\/2013\/04\/06\/t2108-update-130405\/\" target=\"_blank\">I discussed last Friday<\/a>. Notice how the intraday trading is following a nice upward trend launching with pinpoint accuracy after the first 30 minutes of selling last Friday.<\/p>\n<p><center><br \/>\n<figure id=\"attachment_17407\" aria-describedby=\"caption-attachment-17407\" style=\"width: 490px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/04\/130408_SP500-30min.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/04\/130408_SP500-30min.png\" alt=\"All losses from Friday&#039;s employment report are now reversed\" title=\"All losses from Friday&#039;s employment report are now reversed\" width=\"500\" height=\"350\" class=\"size-full wp-image-17407\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/04\/130408_SP500-30min.png 500w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/04\/130408_SP500-30min-300x210.png 300w\" sizes=\"auto, (max-width: 500px) 100vw, 500px\" \/><\/a><figcaption id=\"caption-attachment-17407\" class=\"wp-caption-text\">All losses from Friday&#039;s employment report are now reversed<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>With this complete recovery of Friday&#8217;s post-employment report losses, T2108 jumped to 52.5%. This means that the T2108 &#8220;under period&#8221; is over for the 50% threshold. T2108 spent three days under 50% with the S&#038;P 500 gaining just 0.6% at the close of the under period. Yet, given the timing of my SSO purchase, the call options are now up a nice 79%. This is up from the 30% gain at the close of Friday. At today&#8217;s lows, these call options returned to flat (meaning the trade could have started today with even bigger effect at the close). Now that T2108 is OVER 50%, the immediate bias switches to the downside. Yet, this conflicts with the uptrend and the close above the 20DMA for the S&#038;P 500. The bias down does not turn distinctively positive until around day #40 (again, the red dots show the predicted performance of the S&#038;P 500 based on the number of days that T2108 remains above the 50% threshold).<\/p>\n<p><center><br \/>\n<figure id=\"attachment_17408\" aria-describedby=\"caption-attachment-17408\" style=\"width: 394px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/04\/130408_T2108Over50Pct.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/04\/130408_T2108Over50Pct.png\" alt=\"S&amp;P 500 Performance By T2108 Duration Above the 50% Threshold\" title=\"S&amp;P 500 Performance By T2108 Duration Above the 50% Threshold\" width=\"404\" height=\"352\" class=\"size-full wp-image-17408\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/04\/130408_T2108Over50Pct.png 404w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/04\/130408_T2108Over50Pct-300x261.png 300w\" sizes=\"auto, (max-width: 404px) 100vw, 404px\" \/><\/a><figcaption id=\"caption-attachment-17408\" class=\"wp-caption-text\">S&P 500 Performance By T2108 Duration Above the 50% Threshold<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>So, this is where I still need to use judgement in conjunction with the new T2108 Model. If I did not already have the SSO calls in-hand, I might be tempted to immediately short and\/or buy SSO puts. But, overall, the prediction is marginal, essentially flat. So I have insufficient information for changing my bias and the risk\/reward of the trade is not all that good. Instead, I will sell my SSO calls on Tuesday and sit tight&#8230;waiting for the next definitive signal. This model will be a benefit if it allows me to wait out more churn until the next clearer buying\/selling opportunity.<\/p>\n<p>Another potential insight is that the best trades are those where I am fading the S&#038;P 500 once IT moves to the extreme against the T2108 model prediction. While there is likely nothing inherently special about thresholds that are a factor of 5 or 10, it is a quantifiable framework. This framework tells me that in the beginning, I should expect the S&#038;P 500 to perform within a tight range, with a slight negative bias. Move too high too soon, and I may be inclined to fade UNLESS of course T2108 crosses yet another threshold and starts another counter. I have not yet thought through how the crossing of multiple thresholds should be managed. For example, I suspect the highest threshold should dominate the analysis, but this need not be the case.<\/p>\n<p>Stay tuned! (And as always, if there is something that makes no sense, is too confusing, etc&#8230; do not hesitate to ask. The more questions I get, the faster we can mature this overhaul of the T2108 Model!)<\/p>\n<p><center><br \/>\n<strong>Daily T2108 vs the S&#038;P 500<\/strong><br \/>\n<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)\"><\/p>\n<p>Black line: T2108 (measured on the right); Green line: S&#038;P 500 (for comparative purposes)<br \/>\nRed line: T2108 Overbought (70%); Blue line: T2108 Oversold (20%)<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 VXX shares and puts; 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]. 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 &#8230; <a title=\"T2108 Update (April 8, 2013) &#8211; Post-Employment Losses Reversed, Bias to Neutral\" class=\"read-more\" href=\"https:\/\/drduru.com\/onetwentytwo\/2013\/04\/08\/t2108-update-130408\/\">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":[135,1154,62,920],"tags":[1145,65,226,1597],"class_list":["post-17406","post","type-post","status-publish","format-standard","hentry","category-stock-market-trading","category-t2108-model","category-technical-analysis","category-uptrend","tag-data-mining","tag-sp-500","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 (April 8, 2013) - Post-Employment Losses Reversed, Bias to Neutral - 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\/2013\/04\/08\/t2108-update-130408\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"T2108 Update (April 8, 2013) - Post-Employment Losses Reversed, Bias to Neutral - 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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