{"id":21243,"date":"2014-01-22T19:01:54","date_gmt":"2014-01-23T03:01:54","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=21243"},"modified":"2014-01-22T19:01:54","modified_gmt":"2014-01-23T03:01:54","slug":"t2108-update-140122","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2014\/01\/22\/t2108-update-140122\/","title":{"rendered":"T2108 Update (January 22, 2014) &#8211; Finally Overbought (Includes IBM and NFLX Chart Reviews)"},"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>: 71.0%<br \/>\n<strong>VIX Status<\/strong>: 12.8<br \/>\n<strong>General (Short-term) Trading Call<\/strong>: Short (bearish bias).<br \/>\n<strong>Active T2108 periods<\/strong>: Day #138 over 20%, Day #1 over 70% (overbought)<\/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=$SPX&amp;p=D&amp;st=2013-07-17&amp;en=2014-01-17&amp;id=p14085208538\" target=\"_blank\">S&amp;P 500<\/a> or <a title=\"6-month chart of SPY\" href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=SPY&amp;p=D&amp;st=2013-07-17&amp;en=2014-01-17&amp;id=p14085208538\" target=\"_blank\">SPY<\/a><br \/>\n<a title=\"6-month chart of SDS\" href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=SDS&amp;p=D&amp;st=2013-07-17&amp;en=2014-01-17&amp;id=p15880085697\" target=\"_blank\">SDS<\/a> (ProShares UltraShort S&amp;P500)<br \/>\n<a title=\"6-month chart of the U.S. dollar\" href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=$USD&amp;p=D&amp;st=2013-07-17&amp;en=2014-01-17&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=2013-07-17&amp;en=2014-01-17&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=2013-07-17&amp;en=2014-01-17&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=2013-07-17&amp;en=2014-01-17&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=2013-07-17&amp;en=2014-01-17&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=2013-07-17&amp;en=2014-01-17&amp;id=p15880085697\" target=\"_blank\">CAT<\/a> (Caterpillar). <\/p>\n<p><strong>Commentary<\/strong><br \/>\nT2108 avoided overbought status for 52 straight trading days until peeking over the requisite 70% threshold today.<\/p>\n<p><center><br \/>\n<figure id=\"attachment_21244\" aria-describedby=\"caption-attachment-21244\" style=\"width: 540px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2014\/01\/140122_T2108.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2014\/01\/140122_T2108.png\" alt=\"The higher lows makes it look like T2108 has been pressured upward for many months\" width=\"550\" height=\"375\" class=\"size-full wp-image-21244\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2014\/01\/140122_T2108.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2014\/01\/140122_T2108-300x204.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-21244\" class=\"wp-caption-text\">The higher lows makes it look like T2108 has been pressured upward for many months<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>I thought hitting this point would bring resolution to <a href=\"http:\/\/drduru.com\/onetwentytwo\/2014\/01\/18\/t2108-update-140117\/\" target=\"_blank\">an important juncture<\/a>, but the tease just barely continues. The S&#038;P 500 barely advanced on the day and remains stuck right near the top of the &#8220;bear\/bull&#8221; zone that I defined earlier.<\/p>\n<p><center><br \/>\n<figure id=\"attachment_21245\" aria-describedby=\"caption-attachment-21245\" style=\"width: 540px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2014\/01\/140122_SP500.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2014\/01\/140122_SP500.png\" alt=\"S&amp;P 500 continues to crawl along\" width=\"550\" height=\"375\" class=\"size-full wp-image-21245\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2014\/01\/140122_SP500.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2014\/01\/140122_SP500-300x204.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-21245\" class=\"wp-caption-text\">S&#038;P 500 continues to crawl along<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>The S&#038;P 500 (SPY) enters this overbought period after printing a very high performance for the 70% underperiod. I would like to think this means performance from the overbought period has been &#8220;pulled forward,&#8221; especially with earnings season in full throttle now. Instead, I think the better perspective recognizes that once\/if the S&#038;P 500 follows through in this overbought period, the index could take off for another legendary extended overbought rally. For now, I am maintaining the bearish bias UNTIL the follow-through occurs. After that, I will follow the standard overbought strategy: bullish first, bearish with a return to the 70% underperiod and\/or bearish on appropriate technicals before overbought day #20.<\/p>\n<p>I end with two earnings-related chart reviews.<\/p>\n<p>First up, Netflix (NFLX). The stock traded up an incredible 18% or 60 points in after-hours after the company reported earnings. This puts the stock at a fresh all-time high. While Carl Icahn will likely use this fresh gift to once again sell shares into the increased liquidity generated by post-earnings reactions, I do NOT think it is as clear a shorting opportunity as the last post-earnings response. Last time, NFLX soared almost 12% above its upper-Bollinger Band (BB). That move is about as over-extended as they come! This time, NFLX will be trading just above the upper-BB. Do not be surprised to see additional momentum before the stock pulls back for a rest. With Icahn overhang out of the way, it is very possible upward momentum will continue.<\/p>\n<p>I last charted NFLX two weeks ago when it broke below its 50DMA. The stock barely followed through on the selling; three times in the last five trading days, buyers rushed in and picked NFLX off the bottom. I guess I should have taken those moves as a bullish pre-earnings sign! I will now be alert for applying this template in other pre-earnings scenarios featuring a stock that should be selling off.<\/p>\n<p><center><br \/>\n<figure id=\"attachment_21247\" aria-describedby=\"caption-attachment-21247\" style=\"width: 540px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2014\/01\/140122_NFLX.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2014\/01\/140122_NFLX.png\" alt=\"A pre-earnings setup\" width=\"550\" height=\"375\" class=\"size-full wp-image-21247\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2014\/01\/140122_NFLX.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2014\/01\/140122_NFLX-300x204.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-21247\" class=\"wp-caption-text\">A pre-earnings setup<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>Lastly, International Business Machines (IBM). IBM is turning into a good trading stock. Two months ago I wrote &#8220;<a href=\"http:\/\/drduru.com\/onetwentytwo\/2013\/11\/19\/simple-reasons-to-like-ibm\/\" target=\"_blank\">Simple Reasons to Like IBM Despite the Headwinds<\/a>&#8221; and have written <a href=\"http:\/\/drduru.com\/onetwentytwo\/tag\/ibm\/\" target=\"_blank\">a few chart reviews since then<\/a>. I had a modicum of success buying dips but over-extended myself buying a call spread ahead of earnings. That over-confidence has cost me a worthless position but a valuable (re)lesson. There was no real dip to buy here. In fact, IBM had just failed at the 200DMA for the second time this month, triggering what should have been a bright red technical flag to short the stock. The post-earnings trading reaction is indicative of a stock that still has dip-buyers. The stock over-extended a bit below the lower-BB and bounced right into natural resistance\/support at the 50DMA. It is all about the follow-through from here. I will not go long again until a strong close above the 50DMA. Otherwise, the recent W-bottom is likely to get retested relatively quickly.<\/p>\n<p><center><br \/>\n<figure id=\"attachment_21248\" aria-describedby=\"caption-attachment-21248\" style=\"width: 540px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2014\/01\/140122_IBM.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2014\/01\/140122_IBM.png\" alt=\"IBM fails the test\" width=\"550\" height=\"375\" class=\"size-full wp-image-21248\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2014\/01\/140122_IBM.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2014\/01\/140122_IBM-300x204.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-21248\" class=\"wp-caption-text\">IBM fails the test<\/figcaption><\/figure><br \/>\n<\/center><\/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 SPHB and SPLV and SSO puts (pairs trade)<\/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 (January 22, 2014) &#8211; Finally Overbought (Includes IBM and NFLX Chart Reviews)\" class=\"read-more\" href=\"https:\/\/drduru.com\/onetwentytwo\/2014\/01\/22\/t2108-update-140122\/\">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":[584,483,482,220,219,599,62],"tags":[399,400,404,405,65,226,1597],"class_list":["post-21243","post","type-post","status-publish","format-standard","hentry","category-bollinger-band","category-breakdown","category-breakout","category-earnings","category-high-tech","category-internet","category-technical-analysis","tag-ibm","tag-international-business-machines-corporation","tag-netflix","tag-nflx","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 (January 22, 2014) - Finally Overbought (Includes IBM and NFLX Chart Reviews) - 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\/2014\/01\/22\/t2108-update-140122\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"T2108 Update (January 22, 2014) - Finally Overbought (Includes IBM and NFLX Chart Reviews) - 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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