{"id":22758,"date":"2014-06-05T17:20:29","date_gmt":"2014-06-06T00:20:29","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=22758"},"modified":"2014-06-06T07:17:37","modified_gmt":"2014-06-06T14:17:37","slug":"t2108-update-140605","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2014\/06\/05\/t2108-update-140605\/","title":{"rendered":"T2108 Update (June 5, 2014) &#8211; Back to the Edge of Overbought and A Suspension of Disbelief"},"content":{"rendered":"<p><code><\/code>(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>: 67.6%<br \/>\n<strong>VIX Status<\/strong>: 11.7<br \/>\n<strong>General (Short-term) Trading Call<\/strong>: Short ONLY on confirmed weakness (see below)<br \/>\n<strong>Active T2108 periods<\/strong>: Day #230 over 20%, Day #82 over 40%, Day #9 over 60% (over-period), Day #42 under 70% (under-period)<\/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 5005\" href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=$SPX&amp;p=D&amp;st=2013-12-05&amp;en=2014-06-05&amp;id=p14085208538\" target=\"_blank\">S&amp;P 500<\/a> or <a title=\"6-month chart of SPY\" href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=SPY&amp;p=D&amp;st=2013-12-05&amp;en=2014-06-05&amp;id=p14085208538\" target=\"_blank\">SPY<\/a><br \/>\n<a title=\"6-month chart of SDS\" href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=SDS&amp;p=D&amp;st=2013-12-05&amp;en=2014-06-05&amp;id=p15880085697\" target=\"_blank\">SDS<\/a> (ProShares UltraShort S&amp;P500)<br \/>\n<a title=\"6-month chart of the U.S. dollar\" href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=$USD&amp;p=D&amp;st=2013-12-05&amp;en=2014-06-05&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=2013-12-05&amp;en=2014-06-05&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=2013-12-05&amp;en=2014-06-05&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=2013-12-05&amp;en=2014-06-05&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=2013-12-05&amp;en=2014-06-05&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=2013-12-05&amp;en=2014-06-05&amp;id=p15880085697\" target=\"_blank\">CAT<\/a> (Caterpillar).<\/p>\n<p><strong>Commentary<\/strong><br \/>\n<a href=\"http:\/\/drduru.com\/onetwentytwo\/2014\/06\/04\/t2108-update-140604\/\" target=\"_blank\">Wednesday&#8217;s bearish divergence<\/a> barely lasted longer than Mario Draghi and the ECB&#8217;s attempt to weaken the euro (FXE) through looser monetary policies. The S&#038;P 500 jumped yet again, but this time it was accompanied by a healthy surge in T2108. T2108 closed at its second highest point since last falling from overbought status in early April.<\/p>\n<p><center><br \/>\n<figure id=\"attachment_22759\" aria-describedby=\"caption-attachment-22759\" style=\"width: 540px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2014\/06\/140605_SP500.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2014\/06\/140605_SP500.png\" alt=\"The latest surge in the S&amp;P 500 grows....\" width=\"550\" height=\"375\" class=\"size-full wp-image-22759\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2014\/06\/140605_SP500.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2014\/06\/140605_SP500-300x204.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-22759\" class=\"wp-caption-text\">The latest surge in the S&#038;P 500 grows&#8230;.<\/figcaption><\/figure><\/p>\n<p><figure id=\"attachment_22770\" aria-describedby=\"caption-attachment-22770\" style=\"width: 540px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2014\/06\/140605_T2108.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2014\/06\/140605_T2108.png\" alt=\"The edge of overbought\" width=\"550\" height=\"375\" class=\"size-full wp-image-22770\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2014\/06\/140605_T2108.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2014\/06\/140605_T2108-300x204.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-22770\" class=\"wp-caption-text\">The edge of overbought<\/figcaption><\/figure><br \/>\n<\/center><br \/>\n19<br \/>\nThis chart is definitely and firmly bullish. A new uptrend is well-established now with baby-steps that are well short of &#8220;panic buying.&#8221; I probably share a sense of disbelief with a lot of people (or at least of the few who are still paying attention to the market as the summer gets underway!). Suspending disbelief for a while, this setup suggests an imminent extended overbought rally. I had earlier thought hitting overbought would be a bearish event, instead, the melt-up has moved so slowly and so smoothly that overbought does not quite equate to over-stretched here. The biggest caution remains <a href=\"http:\/\/seekingalpha.com\/article\/2237083-where-is-the-risk-the-ironies-and-tensions-between-low-volatility-and-accommodative-monetary-policies\" target=\"_blank\">the extreme levels of complacency<\/a>. If I decide to chase the trend, I will hang disbelief high in a dark closet, behind the old hats and novelty t-shirts&#8230;<\/p>\n<p>The good news for the bears is that this setup makes it ever more clear what weakness looks like for triggering fresh shorts. Currently, a close below 1920 on the S&#038;P 500 is shortable. Even better if it occurs on a tumble out of overbought conditions. As the rally extends on the S&#038;P 500, the trigger point increases.<\/p>\n<p>I will have to write a whole separate article on the euro. One important implication of looser monetary policy from the European Central Bank (ECB) that escaped me when I wrote about the play on the euro is the potential for a ramp in carry trades&#8230;.aka, buy the Australian dollar (FXA). So, while I think I played the gyrations and fake-outs in the euro well, I was not prepared to similarly take advantage of a fresh surge in the Australian dollar. I remain net short the Australian dollar and am rebuilding a short position against the euro. I post related charts below.<\/p>\n<p><center><br \/>\n<figure id=\"attachment_22762\" aria-describedby=\"caption-attachment-22762\" style=\"width: 540px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2014\/06\/140605_EURUSD.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2014\/06\/140605_EURUSD.png\" alt=\"The market refuses to cooperate with the ECB&#039;s plan to fight deflation\" width=\"550\" height=\"375\" class=\"size-full wp-image-22762\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2014\/06\/140605_EURUSD.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2014\/06\/140605_EURUSD-300x204.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-22762\" class=\"wp-caption-text\">The market refuses to cooperate with the ECB&#8217;s plan to fight deflation<\/figcaption><\/figure><\/p>\n<figure id=\"attachment_22760\" aria-describedby=\"caption-attachment-22760\" style=\"width: 540px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2014\/06\/140605_EURUSD-intraday.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2014\/06\/140605_EURUSD-intraday.png\" alt=\"A close-up look of a stubborn market, likely over-crowded with shorts to fall further for now\" width=\"550\" height=\"375\" class=\"size-full wp-image-22760\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2014\/06\/140605_EURUSD-intraday.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2014\/06\/140605_EURUSD-intraday-300x204.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-22760\" class=\"wp-caption-text\">A close-up look of a stubborn market, likely over-crowded with shorts to fall further for now<\/figcaption><\/figure>\n<p><figure id=\"attachment_22761\" aria-describedby=\"caption-attachment-22761\" style=\"width: 540px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2014\/06\/140605_EURAUD.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2014\/06\/140605_EURAUD.png\" alt=\"Even the Australian dollar faded against the euro, but the trend seems clear for a continuation, maybe even acceleration, of a carry trade.  Next move, RBA!\" width=\"550\" height=\"375\" class=\"size-full wp-image-22761\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2014\/06\/140605_EURAUD.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2014\/06\/140605_EURAUD-300x204.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-22761\" class=\"wp-caption-text\">Even the Australian dollar faded against the euro, but the trend seems clear for a continuation, maybe even acceleration, of a carry trade.  Next move, RBA!<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>Up next, the U.S. non-farm payrolls numbers!<\/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: net short euro, net short Australian dollar<\/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 (June 5, 2014) &#8211; Back to the Edge of Overbought and A Suspension of Disbelief\" class=\"read-more\" href=\"https:\/\/drduru.com\/onetwentytwo\/2014\/06\/05\/t2108-update-140605\/\">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":[794,20,62],"tags":[478,996,376,1359,226,1597],"class_list":["post-22758","post","type-post","status-publish","format-standard","hentry","category-europe","category-forex","category-technical-analysis","tag-ecb","tag-euraud","tag-eurusd","tag-sp500","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 (June 5, 2014) - Back to the Edge of Overbought and A Suspension of Disbelief - 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\/06\/05\/t2108-update-140605\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"T2108 Update (June 5, 2014) - Back to the Edge of Overbought and A Suspension of Disbelief - 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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