{"id":24040,"date":"2014-08-20T00:53:55","date_gmt":"2014-08-20T07:53:55","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=24040"},"modified":"2014-08-20T01:00:30","modified_gmt":"2014-08-20T08:00:30","slug":"t2108-update-140819","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2014\/08\/20\/t2108-update-140819\/","title":{"rendered":"T2108 Update (August 19, 2014) – A Gut-Check on Sentiment As the S&P 500 Rolls On"},"content":{"rendered":"

<\/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 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>: 53.8%
\nVIX Status<\/strong>: 12.2%
\nGeneral (Short-term) Trading Call<\/strong>: Hold
\nActive T2108 periods<\/strong>: Day #291 over 20% (includes day #280 at 20.01%), Day #5 over 40%, Day #3 over 50% (overperiod), Day #30 under 60%, Day #31 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><\/p>\n

“The leaders of the European Union, Ukraine and Russia will meet in Minsk on August 26 to discuss energy security and the conflict in east Ukraine, Ukraine’s President Petro Poroshenko said on Tuesday.” – from Reuters, August 19, 2014<\/a>.\n<\/p><\/blockquote>\n

This quote pretty much ended most headline risks from the crisis in Ukraine. Sure there will be setbacks and bad headlines to come, but this quote seems to establish that the process of resolution is truly underway. The market will now tend to look over the horizon for the prospects of that resolution. This headline then is probably a lot more powerful than the one last Friday (August 15) that sent the market hurtling downward for a brief spell<\/a>, giving bears one more hope that a substantial correction was finally on the way.<\/p>\n

I do not say this to bask in complacency. After all, I was bracing for much more volatility in the next two months and a high potential for a notable drawdown in the market<\/a>. I make the above point because it is important for understanding sentiment and thus the technicals going forward. To get lower prices in the near-term, something has to happen even worse than the prospect of a Russian invasion of Ukraine. This is no different than all the other crises and particularly geo-political jolts the market has weathered since the financial crisis. <\/p>\n

It was another strong day for the S&P 500 (SPY). For the fourth trading day out of the last five, the index closed at or near its high of the day. Since the resolution of a bullish divergence<\/a>, the index has printed healthy gains on six of the last eight trading days. The chart below shows that the S&P 500 is within inches of setting fresh all-time highs…and this time there is plenty of upside room with the Bollinger Bands (BBs) wide open. <\/p>\n


\n
\"The<\/a>
The S&P 500 continues its surge out of oversold conditions<\/figcaption><\/figure>
\n<\/center> <\/p>\n

T2108 followed along with the program by closing on its high at 53.8%. T2108 was last at this level July 23rd, right where the S&P 500 peaked before the last bout of selling. Closing above this level will accomplish another bullish confirmation of the upward move. <\/p>\n

Since I am always good for caveats and caution, here is one I found from my old mentor Trader Mike.<\/p>\n

<\/p>\n
\n

"@SwingTradeBot<\/a>: a bullish day on the surface but my bull vs. bear scans are only 50.2% to 49.8% $STUDY<\/a> http:\/\/t.co\/aBUwfu4x56<\/a>"<\/p>\n

— Michael Seneadza (@TraderMike) August 19, 2014<\/a><\/p><\/blockquote>\n