{"id":17830,"date":"2013-05-05T22:42:25","date_gmt":"2013-05-06T05:42:25","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=17830"},"modified":"2013-05-05T22:51:40","modified_gmt":"2013-05-06T05:51:40","slug":"t2108-update-130503","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2013\/05\/05\/t2108-update-130503\/","title":{"rendered":"T2108 Update (May 3, 2013): Overbought &#8211; Month of May versus T2108 Technicals"},"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>: 71.6%<br \/>\n<strong>VIX Status<\/strong>: 12.9<br \/>\n<strong>General (Short-term) Trading Call<\/strong>: Hold (see below for more details)<\/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=$SPX&#038;p=D&#038;st=2012-11-03&#038;en=2013-05-03&#038;id=p14085208538\" title=\"6-month chart of the S&#038;P 500\" target=\"_blank\">S&#038;P 500<\/a> or <a href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=SPY&#038;p=D&#038;st=2012-11-03&#038;en=2013-05-03&#038;id=p14085208538\" title=\"6-month chart of SPY\" target=\"_blank\">SPY<\/a><br \/>\n<a href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=SDS&#038;p=D&#038;st=2012-11-03&#038;en=2013-05-03&#038;id=p15880085697\" title=\"6-month chart of SDS\" target=\"_blank\">SDS<\/a> (ProShares UltraShort S&#038;P500)<br \/>\n<a href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=$USD&#038;p=D&#038;st=2012-11-03&#038;en=2013-05-03&#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=2012-11-03&#038;en=2013-05-03&#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=2012-11-03&#038;en=2013-05-03&#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=2012-11-03&#038;en=2013-05-03&#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=2012-11-03&#038;en=2013-05-03&#038;id=p15880085697\" title=\"6-month chart of CAT\" target=\"_blank\">CAT<\/a> (Caterpillar)<\/p>\n<p><strong>Commentary<\/strong><br \/>\nT2108 managed to hit overbought before the week ended after all. The S&#038;P 500 surged to a new all-time high with a 1.1% gain in the wake of what the market seemed to interpret as a good employment report. However, I feel that momentum is so strong now that even a weak number could not have stopped the current technical strength (and mainstream media headlines would have attributed the strength to the market&#8217;s anticipation of more accommodation from the Fed due to weak employment numbers).<\/p>\n<p><center><br \/>\n<figure id=\"attachment_17831\" aria-describedby=\"caption-attachment-17831\" style=\"width: 490px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/05\/130503_SP500.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/05\/130503_SP500.png\" alt=\"The S&amp;P 500 soars into freshly unexplored territory\" title=\"The S&amp;P 500 soars into freshly unexplored territory\" width=\"500\" height=\"350\" class=\"size-full wp-image-17831\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/05\/130503_SP500.png 500w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/05\/130503_SP500-300x210.png 300w\" sizes=\"auto, (max-width: 500px) 100vw, 500px\" \/><\/a><figcaption id=\"caption-attachment-17831\" class=\"wp-caption-text\">The S&P 500 soars into freshly unexplored territory<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>I was hoping to have a complete review of what the overhauled T2108 Model has to say about this overbought period, but I will have to save the details for another day. In the meantime, I highly recommend you read my thoughts for this month on Seeking Alpha here: &#8220;<a href=\"http:\/\/seekingalpha.com\/article\/1404081-this-month-of-may-is-not-likely-to-hurt-just-in-case-some-hedging-ideas\" target=\"_blank\">This Month Of May Is Not Likely To Hurt &#8211; Just In Case, Some Hedging Ideas<\/a>.&#8221; In this piece, I update a surprising view I developed from two years ago revealing that May and the subsequent summer is only bad when it is REALLY bad. This time around, the odds favor a May that does NOT ring the selling bell.<\/p>\n<p>With that backdrop, I remain uninterested in trying to fade the market here without additional technical confirmation. Setting a floor under which I would trigger a short (it was 1580 on the S&#038;P 500), helped to avoid getting caught leaning the wrong way on the rally over the past two days. I now bump that floor up to Friday&#8217;s low &#8211; that technical level just sings out to me as a fine dividing line for short-term bear versus bull trades. This level neatly coincides with the previous all-time high and was tight resistance until Friday&#8217;s rally.<\/p>\n<p>This is the 11th day of the T2108 40% overperiod and of course the first day of the 70% overperiod. According to the new T2108 Trading Model (TTM), the market is reaching toward its maximum downside risk levels over the next 10 or so trading days (two calendar weeks). The S&#038;P 500 price prediction for the 40% overperiod is heavily biased negatively if T2108 drops below 40%. This part should be obvious given how high the S&#038;P 500 has climbed now. Combine this risk with a median duration of about 4 days and average duration of about 7 or 8 days for the 70% overperiod, and we get one explosive combination. Thus, I definitely want to load up the truck on SSO puts with the S&#038;P 500 CLOSING below 1597. If no decline occurs, then the S&#038;P 500 will likely experience another extended overbought period. In fact, it makes sense for the most bullish amongst you to open up such trades here with a tight stop below 1597. I will be looking for buy-on-dip opportunities in individual stocks as long as the S&#038;P 500 stays above 1597.<\/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: <\/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 (May 3, 2013): Overbought &#8211; Month of May versus T2108 Technicals\" class=\"read-more\" href=\"https:\/\/drduru.com\/onetwentytwo\/2013\/05\/05\/t2108-update-130503\/\">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":[65,583,226,1597],"class_list":["post-17830","post","type-post","status-publish","format-standard","hentry","category-stock-market-trading","category-technical-analysis","tag-sp-500","tag-sell-in-may","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 (May 3, 2013): Overbought - Month of May versus T2108 Technicals - 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\/05\/05\/t2108-update-130503\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"T2108 Update (May 3, 2013): Overbought - Month of May versus T2108 Technicals - 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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