{"id":21466,"date":"2014-02-06T22:13:45","date_gmt":"2014-02-07T06:13:45","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=21466"},"modified":"2014-02-06T22:13:45","modified_gmt":"2014-02-07T06:13:45","slug":"t2108-update-140206","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2014\/02\/06\/t2108-update-140206\/","title":{"rendered":"T2108 Update (February 6, 2014) – Signs of Bottoming Ahead of January Jobs Report (And Chart Reviews for GMCR, DATA, DDD, AKAM, TWTR, IBM, AAPL)"},"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 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>: 43.6%
\nVIX Status<\/strong>: 17.2 (a 13.7% DEcrease!)
\nGeneral (Short-term) Trading Call<\/strong>: Short (bearish bias) still with caveats (see below)
\nActive T2108 periods<\/strong>: Day #149 over 20%, Day #108 over 30%, Day #1 over 40% (overperiod), Day #5 under 50% (underperiod), Day #11 under 70%<\/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)
\nEEM<\/a> (iShares MSCI Emerging Markets)
\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>
\nThe week started on a very sour note but that is as far as bears could push their case. Now, signs are finally piling up on the side of the bulls, making a case for a (short-term?) bottom. As I explained in the last T2108 Update<\/a>, my bearishness is “soft” in that I am looking to fade a rally while at the same time fade volatility as that rally unfolds. My assessment of a likely bottom from the last T2108 Update is a case in point:<\/p>\n

“All the ingredients are in place for a bounce on Tuesday that could sustain itself for several days if not longer: a tremendous surge in the VIX suggesting a washout of sellers and fear, the S&P 500 well over-extended below its lower-Bollinger Band, T2107 at its apparent lows, and quasi-oversold conditions for T2108. While I suspected tonight’s T2108 Update would turn up bullish tidings, I did not dare replace my now worthless SSO call options with a fresh tranche. Strangely enough, a low-ball limit order for a fresh tranche of iPath S&P 500 VIX ST Futures ETN (VXX) puts did not execute. This lack of execution makes me suspect even more that a bounce is coming and volatility is finally peaking. We will see.”\n<\/p><\/blockquote>\n

As it turned out, the VIX collapsed the very next day and collapsed even further today (Thursday, February 6, 2014). My bets against volatility – iPath S&P 500 VIX ST Futures ETN (VXX) and ProShares Ultra VIX Short-Term Futures ETF (UVXY) – are now essentially about flat now, and should be nicely profitable by sometime next week at the current pace of movement. I did manage to double down on the VXX puts as VXX and UVXY managed to rise higher even as the VIX had already peaked.<\/p>\n


\n
\"Volatility<\/a>
Volatility has been volatile but today’s plunge could be important follow-through to calmer days ahead<\/figcaption><\/figure><\/p>\n

\"UVXY<\/a>
UVXY finally responds to declining volatility with its own massive plunge…<\/figcaption><\/figure>
\n<\/center><\/p>\n

The S&P 500 (SPY) rallied so strongly today that it tore right through what I thought would be the next resistance level, the post-taper low. The good side of today’s move is that it did not even give me a chance to fade the index with fresh SSO puts. Now I have no choice but to look for a rally into 1800 and\/or the 50-day moving average (DMA). Both levels are pretty close to the declining 20DMA.<\/p>\n


\n
\"The<\/a>
The S&P 500 surges right through the post-taper low<\/figcaption><\/figure>
\n<\/center><\/p>\n

The rally of course sent T2108 popping as well. It is starting to look like yesterday’s low around 35% will be the low for this cycle – no oversold buying yet! Here is what I tweeted in the morning before the rally really took off.<\/p>\n

<\/p>\n
\n

%stocks>40DMA creeping upward. At 41% now. May have already seen low for this cycle. #T2108<\/a> $SPY<\/a><\/p>\n

— Data-driven $$$ (@DrDuru) February 6, 2014<\/a><\/p><\/blockquote>\n