{"id":28547,"date":"2015-05-28T01:11:03","date_gmt":"2015-05-28T08:11:03","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=28547"},"modified":"2015-05-28T01:11:03","modified_gmt":"2015-05-28T08:11:03","slug":"t2108-update-150527","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2015\/05\/28\/t2108-update-150527\/","title":{"rendered":"T2108 Update (May 27, 2015) – Volatility Survives (for now) the Same Old Chop"},"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 occasionally posted on twitter using the #120trade hashtag<\/a>. T2107 measures the percentage of stocks trading above their respective 200DMAs)<\/p>\n

T2108 Status<\/strong>: 45.0%
\nT2107 Status<\/strong>: 51.3%
\nVIX Status<\/strong>: 13.3
\nGeneral (Short-term) Trading Call<\/strong>: Neutral.
\nActive T2108 periods<\/strong>: Day #151 over 20%, Day #110 above 30%, Day #1 above 40% (overperiod, ended 1 day below 40%), Day #3 under 50% (underperiod), Day #21 under 60%, Day #220 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>
\nToday delivered a great example of how the stock market does NOT respond the moves in the U.S. dollar index (UUP). The U.S. dollar ended the day flat, yet the S&P 500 (SPY) was still able to recover most of its losses from Tuesday. On that day, the surge in the dollar was supposedly responsible (or at least correlated with) the plunge in the stock market. It stands to reason that mainly dollar weakness could return the S&P 500 to the previous level.<\/p>\n


\n
\"This<\/a>
This close-up of the S&P 500 using the SPY ETF shows most clearly the complete reversal of the prior day’s loss<\/figcaption><\/figure>
\n<\/center><\/p>\n

T2108 also bounced sharped but did NOT recover all its loss.<\/p>\n


\n
\"T2108<\/a>
T2108 bounces smartly off the bottom of its trading range<\/figcaption><\/figure>
\n<\/center><\/p>\n

Of course, this bounce also reversed my gains from the previous day’s trade on volatility<\/a>. Interestingly, the volatility index, the VIX, only lost about half its previous loss. So it is still very possible that the path going forward is higher volatility.<\/p>\n

If the currency market has anything to say about volatility, recent gyrations are telling me that the waters are getting rougher. Attracting my attention bigtime is the sudden renewed weakness in the Japanese yen (FXY). Presumably, yen weakness is still considered bullish for carry trades that support asset markets. However, the sudden reawakening does not seem to have a palpable catalyst. <\/p>\n


\n
\"USD\/JPY<\/a>
USD\/JPY suddenly breaks out to fresh multi-year highs – a fresh continuation of 2014’s sharp weakness?<\/figcaption><\/figure>
\n<\/center><\/p>\n

I am seeing other jitters in the currency market with sharp lefts and rights happening without warning or palpable catalyst. We only really have follow-through to last week’s U.S. Consumer Price Index (CPI) as a prime driver. So, even if the S&P 500 makes another one of its 2015 classic new marginal highs, I am sticking by the long-volatility trade as a way to stay prepared for “something” happening out of nowhere.<\/p>\n

One stock that looks like an accident waiting to happen is Shake Shack (SHAK). Last Friday, it printed a classic topping pattern (a spinning top) that was confirmed by a gap down that has turned this pattern into an “abandoned baby top.”<\/p>\n


\n
\"Shake<\/a>
Shake Shack (SHAK) has had an incredible run-up from its breakout point, but it has now lost 21% in two days.<\/figcaption><\/figure>
\n<\/center><\/p>\n

Over the weekend, a friend noted it was primed to fall, and I agreed with him.<\/p>\n

<\/p>\n
\n

Time to short $SHAK<\/a> ? Well above its upper Bollinger band & 100 s\/be resistance http:\/\/t.co\/wuNC74rTd1<\/a><\/p>\n

— Michael Seneadza (@TraderMike) May 23, 2015<\/a><\/p><\/blockquote>\n