{"id":26694,"date":"2015-01-27T19:42:42","date_gmt":"2015-01-28T03:42:42","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=26694"},"modified":"2015-01-27T19:44:22","modified_gmt":"2015-01-28T03:44:22","slug":"t2108-update-150127","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2015\/01\/27\/t2108-update-150127\/","title":{"rendered":"T2108 Update (January 27, 2015) – An Official Chopfest"},"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 sometimes posted on twitter using the #120trade hashtag<\/a>. T2107 measures the percentage of stocks trading above their respective 200DMAs)<\/p>\n

T2108 Status<\/strong>: 51.5%
\nT2107 Status<\/strong>: 46.5%
\nVIX Status<\/strong>: 17.2
\nGeneral (Short-term) Trading Call<\/strong>: Bearish (only because S&P 500 is now below its 50DMA. Overall, market remains in a “chopfest” trading range and bear\/bull calls are NOT stable)
\nActive T2108 periods<\/strong>: Day #68 over 20%, Day #27 above 30%, Day #7 over 40%, day #2 over 50% (overperiod), Day #37 under 60% (underperiod), Day #138 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>
\nHaving multiple components of the Dow Jones Industrial Average (DIA) report disappointing earnings was just too much for the market to handle. Sympathy selling helped send the S&P 500 (SPY) below its 50DMA for the fourth time in just 6 weeks. The index lost 1.3% on the day. The chart below shows a trading range that has lasted at least 3 months, creating an official chopfest. The 50DMA AND the line marking the start of last month’s “Santa Claus” rally are serving as pivots. This pattern makes bear\/bull calls very unstable and rewards flexibility and mobility.<\/p>\n


\n
\"The<\/a>
The S&P 500 is in a bearish position again but remains locked in a trading range<\/figcaption><\/figure>
\n<\/center><\/p>\n

Today’s loss finished the reversal of all the S&P 500’s gains post ECB QE (European Central Bank quantitative easing). T1208 fared much better as it bounced of its lows and managed to lose a mere two percentage points. This is not quite a bullish divergence, but it does set up a potentially strong day as the market gets revved up for another Federal Reserve decision. I ALMOST put on another fade volatility trade in anticipation of more soothing words from the Fed, but the jump in volatility was not nearly extreme enough to setup a good risk\/reward trade. <\/p>\n


\n
\"Volatility<\/a>
Volatility gaps up on a bad earnings day but cannot hold its high of the day<\/figcaption><\/figure><\/p>\n

\"ProShares<\/a>
ProShares Short VIX Short-Term Futures (SVXY) is still hugging its 20DMA which remains an important feature of a downtrend<\/figcaption><\/figure>
\n<\/center><\/p>\n

At this point, I need to wait for another extreme move in volatility – a steep drop in ProShares Short VIX Short-Term Futures (SVXY) – before even thinking about fading volatility. I am increasingly wary of the on-going downtrend in SVXY marked by its declining 20DMA.<\/p>\n

One of the Dow components causing trouble today was Caterpillar, Inc. (CAT). Apparently, plunging oil prices have caused serious challenges for CAT’s oil-based business. I think the following bullets points from Seeking Alpha<\/a> speak volumes, especially the last point!<\/p>\n