{"id":26388,"date":"2015-01-06T23:57:08","date_gmt":"2015-01-07T07:57:08","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=26388"},"modified":"2015-01-06T23:57:08","modified_gmt":"2015-01-07T07:57:08","slug":"t2108-update-150106","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2015\/01\/06\/t2108-update-150106\/","title":{"rendered":"T2108 Update (January 6, 2015) &#8211; Goodbye Santa, Hello Volatility"},"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 sometimes posted on twitter using <a href=\"http:\/\/twitter.com\/#!\/search\/%23120trade\" target=\"_blank\">the #120trade hashtag<\/a>. T2107 measures the percentage of stocks trading above their respective 200DMAs)<\/p>\n<p><strong>T2108 Status<\/strong>: 34.0% (quasi-oversold)<br \/>\n<strong>T2107 Status<\/strong>: 44.0%<br \/>\n<strong>VIX Status<\/strong>: 21.1 (up 6.0% but second day fading well off high of the day)<br \/>\n<strong>General (Short-term) Trading Call<\/strong>: Hold.<br \/>\n<strong>Active T2108 periods<\/strong>: Day #54 over 20%, Day #13 above 30% (overperiod), Day #2 under 40%, Day #4 under 50%, Day #22 under 60%, Day #124 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 5005\" href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=$SPX&amp;p=D&amp;st=2014-07-06&amp;en=2015-01-06&amp;id=p14085208538\" target=\"_blank\">S&amp;P 500<\/a> or <a title=\"6-month chart of SPY\" href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=SPY&amp;p=D&amp;st=2014-07-06&amp;en=2015-01-06&amp;id=p14085208538\" target=\"_blank\">SPY<\/a><br \/>\n<a title=\"6-month chart of SDS\" href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=SDS&amp;p=D&amp;st=2014-07-06&amp;en=2015-01-06&amp;id=p15880085697\" target=\"_blank\">SDS<\/a> (ProShares UltraShort S&amp;P500)<br \/>\n<a title=\"6-month chart of the U.S. dollar\" href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=$USD&amp;p=D&amp;st=2014-07-06&amp;en=2015-01-06&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=2014-07-06&amp;en=2015-01-06&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=2014-07-06&amp;en=2015-01-06&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=2014-07-06&amp;en=2015-01-06&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=2014-07-06&amp;en=2015-01-06&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=2014-07-06&amp;en=2015-01-06&amp;id=p15880085697\" target=\"_blank\">CAT<\/a> (Caterpillar).<\/p>\n<p><strong>Commentary<\/strong><br \/>\nThis T2108 Update is essentially a quick follow-up to <a href=\"http:\/\/drduru.com\/onetwentytwo\/2015\/01\/06\/t2108-update-150105\/\" target=\"_blank\">the previous day&#8217;s T2108 Update<\/a>. Nothing has changed with my overall assessment of the technical health of the market.<\/p>\n<p>It was another day of selling for the S&#038;P 500 (SPY) with the day ending with the exact loss needed to neatly erase last month&#8217;s Santa Claus rally. Yet again, you just cannot make this stuff up.<\/p>\n<p><center><br \/>\n<figure id=\"attachment_26390\" aria-describedby=\"caption-attachment-26390\" style=\"width: 540px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/01\/150106_SP500.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/01\/150106_SP500.png\" alt=\"Bye, bye Santa!\" width=\"550\" height=\"375\" class=\"size-full wp-image-26390\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/01\/150106_SP500.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/01\/150106_SP500-300x205.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-26390\" class=\"wp-caption-text\">Bye, bye Santa!<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>The day&#8217;s selling drove T2108 ever closer to oversold trading conditions. The 2-day 33% loss for T2108 qualifies it for quasi-oversold trading conditions. My hope in these cases is that the T2108 Trading Model (TTM) will come up with a strong projection for a bounce. Unfortunately, this time around, the TTM generated a strong projection (71% chance) of a LOSS for tomorrow&#8217;s (January 7th) trading on the S&#038;P 500. The classification error is a decent 39% and the historical error is about 25%. (Fore more details on this model and important news of the major update I made recently, see &#8220;<a href=\"http:\/\/drduru.com\/onetwentytwo\/2014\/12\/29\/t2108-update-141229\/\" target=\"_blank\">Preparing for A New Year: Expect Prices to Fluctuate<\/a>&#8220;).<\/p>\n<p>While all this drama effectively kicked off with <a href=\"http:\/\/drduru.com\/onetwentytwo\/2015\/01\/01\/t2108-update-141231\/\" target=\"_blank\">a historic surge in volatility to end 2014<\/a>, the VIX has had a hard time increasing in the subsequent days of selling. The S&#038;P 500 lost about 1% when volatility surged 21%. The last two days of selling have featured losses on the S&#038;P 500 of 1.8% and 0.9% while the VIX has &#8220;only&#8221; increased 12.0% and 6.0%, respectively. Moreover, the VIX has faded well off its highs for the day each time.<\/p>\n<p><center><br \/>\n<figure id=\"attachment_26392\" aria-describedby=\"caption-attachment-26392\" style=\"width: 540px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/01\/150106_VIX.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/01\/150106_VIX.png\" alt=\"Hello, volatility!\" width=\"550\" height=\"375\" class=\"size-full wp-image-26392\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/01\/150106_VIX.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/01\/150106_VIX-300x205.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-26392\" class=\"wp-caption-text\">Hello, volatility!<\/figcaption><\/figure><br \/>\n<\/center> <\/p>\n<p>I am not really sure what to make of these contrasts except to say that I think fading volatility will be the ultimate winner here. In the last T2108 Update, I neglected to acknowledge that the approach of earnings season is likely going to keep volatility elevated for a while. So it does not make sense to get aggressive with fades until I see how the market starts reacting to earnings. I am putting on hold any further buys of put options on ProShares Ultra VIX Short-Term Futures (UVXY) and will scale into ProShares Short VIX Short-Term Futures (SVXY) at a slower pace for now. I did add a small amount of shares today simply based on the VIX tagging its upper-Bolling Band at one point and getting &#8220;close enough&#8221; to the highs of the last peak. Clearly, if the selling continues from here, the VIX could break through this resistance as the S&#038;P 500 breaks down closer to its support at the 200DMA.<\/p>\n<p>January will be a month for staying even more nimble than usual.<\/p>\n<p>I conclude with this chart of the Australian dollar (FXA) versus the Japanese yen (JPY). I forgot to include it in the last T2108 Update as further emphasis of the growing bearishness. Note that AUD\/JPY decisively sliced through its 200DMA and has put the December low into play. This currency pair will be key to watch. For emphasis, I include an intraday comparison between the AUD\/JPY and SPY. Note how neatly the two bounced together when buyers made a late attempt to put a good face on the close.<\/p>\n<p><center><br \/>\n<figure id=\"attachment_26396\" aria-describedby=\"caption-attachment-26396\" style=\"width: 540px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/01\/150106_AUDJPY.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/01\/150106_AUDJPY.png\" alt=\"The Australian dollar is breaking down against the Japanese yen again\" width=\"550\" height=\"375\" class=\"size-full wp-image-26396\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/01\/150106_AUDJPY.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/01\/150106_AUDJPY-300x205.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-26396\" class=\"wp-caption-text\">The Australian dollar is breaking down against the Japanese yen again<\/figcaption><\/figure><\/p>\n<p><figure id=\"attachment_26394\" aria-describedby=\"caption-attachment-26394\" style=\"width: 540px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/01\/150106_AUDJPYvsSPY.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/01\/150106_AUDJPYvsSPY.png\" alt=\"AUD\/JPY and SPY were near-perfect dance partners\" width=\"550\" height=\"375\" class=\"size-full wp-image-26394\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/01\/150106_AUDJPYvsSPY.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/01\/150106_AUDJPYvsSPY-300x205.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-26394\" class=\"wp-caption-text\">AUD\/JPY and SPY were near-perfect dance partners<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p><strong>Daily T2108 vs the S&amp;P 500<\/strong><br \/>\n<img loading=\"lazy\" decoding=\"async\" title=\"T2108 vs. the S&amp;P 500 (DAILY)\" src=\"http:\/\/www.drduru.com\/money\/charts\/T2108-daily_s.png\" alt=\"\" width=\"500\" height=\"350\" \/><\/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%)<\/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\" src=\"http:\/\/www.drduru.com\/money\/charts\/T2108-weekly_s.png\" alt=\"Weekly T2108\" 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><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 UVXY puts, long SVXY, short the Australian dollar and net short the Japanese yen<\/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 6, 2015) &#8211; Goodbye Santa, Hello Volatility\" class=\"read-more\" href=\"https:\/\/drduru.com\/onetwentytwo\/2015\/01\/06\/t2108-update-150106\/\">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":[20,1154,62,1210],"tags":[772,310,138,1274,65,1363,226,1597,1092,303,178],"class_list":["post-26388","post","type-post","status-publish","format-standard","hentry","category-forex","category-t2108-model","category-technical-analysis","category-trading-model","tag-audjpy","tag-australian-dollar","tag-japanese-yen","tag-quasi-oversold","tag-sp-500","tag-svxy","tag-t2108","tag-technical-analysis","tag-uvxy","tag-vix","tag-volatility"],"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 6, 2015) - Goodbye Santa, Hello Volatility - 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\/2015\/01\/06\/t2108-update-150106\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"T2108 Update (January 6, 2015) - Goodbye Santa, Hello Volatility - 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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