{"id":29126,"date":"2015-06-29T22:22:50","date_gmt":"2015-06-30T05:22:50","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=29126"},"modified":"2015-06-29T22:23:49","modified_gmt":"2015-06-30T05:23:49","slug":"t2108-update-150629","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2015\/06\/29\/t2108-update-150629\/","title":{"rendered":"T2108 Update (June 29, 2015) – A Greased Market Skids Toward Oversold Conditions"},"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>: 26.1% (a 38.4% plunge! 16 percentage points!)
\nT2107 Status<\/strong>: 40.2%
\nVIX Status<\/strong>: 18.9 (up 34%!)
\nGeneral (Short-term) Trading Call<\/strong>: Bullish
\nActive T2108 periods<\/strong>: Day #174 over 20%, Day #1 under 30% and 40% (underperiods) ending 132 days above 30% and 8 days above 40%), Day #27 under 50%, Day #44 under 60%, Day #243 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>
\nT2108 closed at 26.2%, its lowest close since the rebound from last October’s big oversold swoon. It is very tempting to declare the market “close enough” to the oversold threshold of 20%. However, all the chop during this year has flattened moving averages which in turn means T2108 can cover a lot of ground with the right kind of trading power. The market received just such a push today. The surge in trading volume is clear on the chart of SPY: sellers drowned the sea in red with double the average! It was quite a combination of trading on the day with the S&P 500 (and SPY) barreling toward and into 200DMA support, T2108 crumbling a massive 16 percentage points (a drop of 39%), and the VIX soaring 34%. <\/p>\n


\n
\"The<\/a>
The S&P 500 makes a beeline for 200DMA support – test that last happened in October…and dramatically failed!<\/figcaption><\/figure><\/p>\n
\"The<\/a>
The chart for SPY makes the volume surge clear – almost a double from average!<\/figcaption><\/figure>\n

\"T2108<\/a>
T2108 plunges 16 percentage points to its lowest point since the October swoon<\/figcaption><\/figure>
\n<\/center><\/p>\n

The trading action in currency markets motivated me to trade as if T2108 is already oversold. Even as the S&P 500 continued to slip all day and volatility expanded, the euro (FXE) – centerpoint of the Greek drama receiving the blame for the market’s troubles – remarkably gained strength. The euro not only quickly reversed its gap down, the roiling currency surged well past the gap. Either the market is looking forward to Greece’s exit from the euro, or market participants are assuming that central banks and governmental authorities will now be forced to provide a “solution” quick, fast, and in a hurry…<\/p>\n


\n
\"The<\/a>
The euro snaps right back from the latest developments in Greece<\/figcaption><\/figure>
\n<\/center><\/p>\n

In times of panic, the opposite trade often prevails. So, I closed out my short on EUR\/USD soon after the open on Sunday. I rebuilt that short into the resurgence in preparation for the next swoon from dramatic headlines. I plan to accumulate further up to previous resistance around 1.14. There is ultimately no good outcome from Greece short of the generosity of a restructuring of debt.<\/p>\n

The euro’s resilience initially seemed to explain the immediate bounce on the S&P 500 at the open. The divergence from there was quite remarkable and surprising.<\/p>\n

<\/p>\n
\n

So far, lots of #Grexit<\/a> bluster, little bite. Sure $GREK<\/a> down 15% but $EURUSD<\/a> almost fully recovered gap down. $SPY<\/a> down just 0.6% #forex<\/a><\/p>\n

— Dr. Duru (@DrDuru) June 29, 2015<\/a><\/p><\/blockquote>\n