{"id":20476,"date":"2013-11-20T23:02:35","date_gmt":"2013-11-21T07:02:35","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=20476"},"modified":"2013-11-21T04:35:59","modified_gmt":"2013-11-21T12:35:59","slug":"t2108-update-131120","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2013\/11\/20\/t2108-update-131120\/","title":{"rendered":"T2108 Update (November 20, 2013) &#8211; A Divergence Into Quasi-Oversold Conditions"},"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 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>: 48.9%<br \/>\n<strong>VIX Status<\/strong>: 13.4<br \/>\n<strong>General (Short-term) Trading Call<\/strong>: Aggressive traders should stay short. Stop out on S&#038;P 500 follow-through above 1800. T2108 Trading Model (TTM) generates 68% chance of an up day for November 21st based on <a href=\"http:\/\/drduru.com\/onetwentytwo\/2013\/04\/04\/t2108-update-130403\/\">quasi-oversold conditions<\/a>.<br \/>\n<strong>Active T2108 periods<\/strong>: Day #102 over 20% (overperiod), Day #1 under 50% (underperiod), Day #10 under 60%, Day #15 under 70%<\/p>\n<p><strong>Reference Charts<\/strong> (click for view of last 6 months from Stockcharts.com):<br \/>\n<a title=\"6-month chart of the S&amp;P 500\" href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=$SPX&amp;p=D&amp;st=2013-05-20&amp;en=2013-11-20&amp;id=p14085208538\" target=\"_blank\">S&amp;P 500<\/a> or <a title=\"6-month chart of SPY\" href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=SPY&amp;p=D&amp;st=2013-05-20&amp;en=2013-11-20&amp;id=p14085208538\" target=\"_blank\">SPY<\/a><br \/>\n<a title=\"6-month chart of SDS\" href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=SDS&amp;p=D&amp;st=2013-05-20&amp;en=2013-11-20&amp;id=p15880085697\" target=\"_blank\">SDS<\/a> (ProShares UltraShort S&amp;P500)<br \/>\n<a title=\"6-month chart of the U.S. dollar\" href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=$USD&amp;p=D&amp;st=2013-05-20&amp;en=2013-11-20&amp;id=p25615696567\" target=\"_blank\">U.S. Dollar Index<\/a> (volatility index)<br \/>\n<a title=\"6-month chart of EEM\" href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=EEM&amp;p=D&amp;st=2013-05-20&amp;en=2013-11-20&amp;id=p15880085697\" target=\"_blank\">EEM<\/a> (iShares MSCI Emerging Markets)<br \/>\n<a title=\"6-month chart of the VIX\" href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=$VIX&amp;p=D&amp;st=2013-05-20&amp;en=2013-11-20&amp;id=p25615696567\" target=\"_blank\">VIX<\/a> (volatility index)<br \/>\n<a title=\"6-month chart of VXX\" href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=VXX&amp;p=D&amp;st=2013-05-20&amp;en=2013-11-20&amp;id=p15880085697\" target=\"_blank\">VXX<\/a> (iPath S&amp;P 500 VIX Short-Term Futures ETN)<br \/>\n<a title=\"6-month chart of EWG\" href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=EWG&amp;p=D&amp;st=2013-05-20&amp;en=2013-11-20&amp;id=p15880085697\" target=\"_blank\">EWG<\/a> (iShares MSCI Germany Index Fund)<br \/>\n<a title=\"6-month chart of CAT\" href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=CAT&amp;p=D&amp;st=2013-05-20&amp;en=2013-11-20&amp;id=p15880085697\" target=\"_blank\">CAT<\/a> (Caterpillar)<\/p>\n<p><strong>Commentary<\/strong><br \/>\nThe S&#038;P 500 (SPY) ended last Friday with its sixth straight week delivering upside to investors.<\/p>\n<p><center><br \/>\n<figure id=\"attachment_20477\" aria-describedby=\"caption-attachment-20477\" style=\"width: 510px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/11\/131120_SP500-weekly.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/11\/131120_SP500-weekly.png\" alt=\"The S&amp;P 500 has had a strong two years full of streaks\" width=\"520\" height=\"429\" class=\"size-full wp-image-20477\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/11\/131120_SP500-weekly.png 520w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/11\/131120_SP500-weekly-300x247.png 300w\" sizes=\"auto, (max-width: 520px) 100vw, 520px\" \/><\/a><figcaption id=\"caption-attachment-20477\" class=\"wp-caption-text\">The S&#038;P 500 has had a strong two years full of streaks<\/figcaption><\/figure><br \/>\n<strong>Source: <a href=\"http:\/\/scharts.co\/18pE2vT\" target=\"_blank\">StockCharts.com<\/a><\/strong><br \/>\n<\/center><\/p>\n<p>The chart above is a handy reminder of what the bears are up against when trying to fade this market. While the recent six-week up-streak was noteworthy, it was not surprising given this strong uptrend. What IS surprising is that once again, T2108 is plunging while the S&#038;P 500 is not also selling off hard. In three days, T2108 has fallen 16% while the S&#038;P 500 is off only -0.9%. At least the index IS moving downward. <a href=\"http:\/\/drduru.com\/onetwentytwo\/2013\/11\/07\/t2108-update-131107\/\" target=\"_blank\">When T2108 plunged for over a week recently, the S&#038;P 500 barely moved at all until a one-day sell-off on November 7th<\/a>. Sellers quickly exhausted themselves and buyers had no trouble reversing the losses. It only took a day.<\/p>\n<p>I failed to examine November 7th&#8217;s drop as a <a href=\"http:\/\/drduru.com\/onetwentytwo\/2013\/04\/04\/t2108-update-130403\/\" target=\"_blank\">quasi-oversold condition<\/a>. This time, I am ready. I even updated the historical data through November 13, 2013 (long overdue!). With T2108 dropping 14% over the past two days, the T2108 Trading Model (TTM) generates a 68% chance that the S&#038;P 500 will close up tomorrow (November 21, 2013). Interestingly, the data refresh finally brings a condition on the S&#038;P 500&#8217;s position relative to its 200DMA. If the S&#038;P 500 were trading BELOW the 200DMA, with all else being equal, the TTM would have generated an 87% chance of a DOWN day. This differentiation according to technicals is what I originally expected when I first constructed the TTM. It is reassuring to see this condition finally appear. There are no branches in the classification tree for position relative to the 20 or 50DMAs.<\/p>\n<p>I continue to watch closely the on-going selling in the high-flyers of the stock market. See <a href=\"http:\/\/drduru.com\/onetwentytwo\/2013\/11\/19\/t2108-update-131118\/\" target=\"_blank\">my last T2108 Update<\/a> for examples. Also, Bespoke Investments quantified the sell-off by slicing up the Russell 1000 into deciles and showing the differentiated performance in the past two weeks versus year-to-date (see &#8220;<a href=\"http:\/\/seekingalpha.com\/article\/1853661-2013s-big-winners-having-a-rough-week\" target=\"_blank\">2013&#8217;s Big Winners Having A Rough Week<\/a>&#8220;). <\/p>\n<p>The sudden weakness in highly speculative stocks will likely continue, maybe even accelerate, given tapering fears have reignited in the stock market. The yield on the 10-year Treasury soared today from 2.71% to 2.79% in the wake of <a href=\"http:\/\/federalreserve.gov\/newsevents\/press\/monetary\/20131120a.htm\" target=\"_blank\">the minutes from the last Fed meeting<\/a>. One of my favorite plays in this volatile rate environment remains a straddle or strangle on iShares MSCI Emerging Markets (EEM). EEM printed another short setup yesterday and today cracked below its 50DMA again. I think this ETF is topping out&#8230;if you look closely, you might even recognize a head and shoulders top in the making.<\/p>\n<p><center><br \/>\n<figure id=\"attachment_20480\" aria-describedby=\"caption-attachment-20480\" style=\"width: 540px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/11\/131120_EEM.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/11\/131120_EEM.png\" alt=\"EEM cracks important support again in what looks like confirmed topping action\" width=\"550\" height=\"375\" class=\"size-full wp-image-20480\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/11\/131120_EEM.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/11\/131120_EEM-300x204.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-20480\" class=\"wp-caption-text\">EEM cracks important support again in what looks like confirmed topping action<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>I end by pointing out that Apple (AAPL) is on the edge of confirming my warning of a downward resolution to a Bollinger Band squeeze. AAPL closed exactly at $515 today which is the support from the January post-earnings gap down. Crack through this, and AAPL will easily retest its 50DMA support which just so happens to rest right around $500&#8230;<\/p>\n<p><center><br \/>\n<figure id=\"attachment_20481\" aria-describedby=\"caption-attachment-20481\" style=\"width: 540px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/11\/131120_AAPL.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/11\/131120_AAPL.png\" alt=\"Apple continues to sag toward a 50DMA retest\" width=\"550\" height=\"375\" class=\"size-full wp-image-20481\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/11\/131120_AAPL.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2013\/11\/131120_AAPL-300x204.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-20481\" class=\"wp-caption-text\">Apple continues to sag toward a 50DMA retest<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>Piecing all these signals together, I am looking through Thursday&#8217;s likely upside to <a href=\"http:\/\/drduru.com\/onetwentytwo\/2013\/11\/19\/t2108-update-131118\/\" target=\"_blank\">an important and critical juncture with Black Friday<\/a>. I continue to think that season will serve as a &#8220;last stand&#8221; for bears to get some real selling going. Until then, I am being very opportunistic in shorting stocks and will use a rally on Thursday to look for new short candidates. I have NOT yet expanded my small tranche of SSO puts. I still prefer to wait for overbought conditions before doing so.<\/p>\n<p><center><br \/>\n<strong>Daily T2108 vs the S&#038;P 500<\/strong><br \/>\n<img loading=\"lazy\" decoding=\"async\" title=\"T2108 vs. the S&amp;P 500 (DAILY)\" alt=\"T2108 vs. the S&amp;P 500 (DAILY)\" src=\"http:\/\/www.drduru.com\/money\/charts\/T2108-daily_s.png\" width=\"500\" height=\"350\" \/><br \/>\n<\/center><\/p>\n<p>Black line: T2108 (measured on the right); Green line: S&amp;P 500 (for comparative purposes)<br \/>\nRed line: T2108 Overbought (70%); Blue line: T2108 Oversold (20%)<\/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\" title=\"Weekly T2108\" alt=\"Weekly T2108\" src=\"http:\/\/www.drduru.com\/money\/charts\/T2108-weekly_s.png\" width=\"500\" height=\"350\" \/><br \/>\n*<strong>All charts created using <\/strong><\/a><strong><a title=\"Freestockcharts.com\" href=\"http:\/\/www.freestockcharts.com\/\" target=\"_blank\">freestockcharts.com<\/a><\/strong> unless otherwise stated<\/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&amp;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 SSO puts; long AAPL shares; long AAPL put spread<\/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 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 are &#8230; <a title=\"T2108 Update (November 20, 2013) &#8211; A Divergence Into Quasi-Oversold Conditions\" class=\"read-more\" href=\"https:\/\/drduru.com\/onetwentytwo\/2013\/11\/20\/t2108-update-131120\/\">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":[219,491,1154],"tags":[250,534,1195,1196,65,226,1597],"class_list":["post-20476","post","type-post","status-publish","format-standard","hentry","category-high-tech","category-oversold","category-t2108-model","tag-aapl","tag-apple-inc","tag-eem","tag-ishares-msci-emerging-markets-index","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 (November 20, 2013) - A Divergence Into Quasi-Oversold Conditions - 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\/11\/20\/t2108-update-131120\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"T2108 Update (November 20, 2013) - A Divergence Into Quasi-Oversold Conditions - 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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