{"id":30802,"date":"2015-09-23T01:47:24","date_gmt":"2015-09-23T08:47:24","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=30802"},"modified":"2015-09-23T01:47:24","modified_gmt":"2015-09-23T08:47:24","slug":"t2108-update-150922","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2015\/09\/23\/t2108-update-150922\/","title":{"rendered":"T2108 Update (September 22, 2015) – The S&P 500 Approaches Oversold Again: The Cases for Extreme Fear"},"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>: 22.4%
\nT2107 Status<\/strong>: 21.0%
\nVIX Status<\/strong>: 22.4
\nGeneral (Short-term) Trading Call<\/strong>: Bullish
\nActive T2108 periods<\/strong>: Day #6 over 20%, Day #3 under 30% (underperiod), Day #25 under 40%, Day #85 under 50%, Day #102 under 60%, Day #307 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>
\nIn the last T2108 Update<\/a> I delivered a healthy dose of sober observation tempered with rays of optimism. On Monday, I was encouraged to see my speculations play out: the S&P 500 rallied in an attempt to reverse Friday’s “strange” selling on the S&P 500 and volatility reversed. However, buyers could not retain the upper hand into the close. Today (September 22) sellers continued where they left off by pressing the S&P 500 (SPY) further below the breakdown point from a wedge pattern. Bob Pisani said on CNBC this was another of those “why are we down days?!?<\/a>” – he succinctly expressed my exact sentiments.<\/p>\n


\n
\"The<\/a>
The S&P 500 succumbs to more selling pressure.<\/figcaption><\/figure>
\n<\/center><\/p>\n

The selling was ALMOST strong enough to push T2108 back into oversold territory. The low on the day was a tantalizing 20.4% before T2108 closed at 22.5%. Since I was primed to look for buying opportunities, I actually took this opportunity to add to my fade of ProShares Ultra VIX Short-Term Futures (UVXY) with put options. I was not expecting a return to oversold territory this soon, and I continue to trade assuming T2108 will avoid a close below 20%. If T2108 drops into oversold territory anyway, I will trade it just as aggressively as I did during the previous oversold periods<\/a>. The main difference between now and then<\/a> is that I will have very few bearish positions on hand going into a new oversold period.<\/p>\n

I was primed to buy on the day because of a strategy I laid out the previous day to fade Presidential candidate Hillary Clinton’s plan to go after pricing in the drug industry<\/a>. (Thank you to MarketWatch for catching my piece<\/a>!) The plan has played out well so far as I managed to get a fill on a lowball limit order for iShares Nasdaq Biotechnology (IBB) call options near the low of the day. The rally off the bottom delivered over a 33% gain on the call options. I am still targeting a complete reversal of the Clinton-inspired sell-off.<\/p>\n

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I just made my buy. =gulp= Hillary Clinton Takes Down the iShares Nasdaq Biotechnology http:\/\/stks.co\/j3A4r<\/a> (complicated by mkt sell-off)<\/p>\n

— Duru A (@DrDuru) Sep. 22 at 09:51 AM<\/a><\/p><\/blockquote>\n