{"id":37318,"date":"2016-12-13T21:24:57","date_gmt":"2016-12-14T05:24:57","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=37318"},"modified":"2016-12-15T02:40:56","modified_gmt":"2016-12-15T10:40:56","slug":"t2108-update-161213","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2016\/12\/13\/t2108-update-161213\/","title":{"rendered":"T2108 Update (December 13, 2016) &#8211; Whispering Warnings for the S&#038;P 500 On December Fed Eve"},"content":{"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 <a href=\"http:\/\/drduru.com\/onetwentytwo\/about\/t2108-resource-page\/\">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 occasionally 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>: 74.5% (5th overbought day)<br \/>\n<strong>T2107 Status<\/strong>: 67.1%<br \/>\n<strong>VIX Status<\/strong>: 12.7<br \/>\n<strong>General (Short-term) Trading Call<\/strong>: cautiously bullish<br \/>\n<strong>Active T2108 periods<\/strong>: Day #205 over 20%, Day #25 over 30%, Day #24 over 40%, Day #22 over 50%, Day #16 over 60%, Day #5 over 70% (overbought)<\/p>\n<p><strong>Commentary<\/strong><br \/>\nThis is day #5 of the (extended) overbought rally that <a href=\"http:\/\/drduru.com\/onetwentytwo\/2016\/12\/08\/t2108-update-161207\/\" target=\"_blank\">I heralded last week<\/a>. It is December Fed Eve: the December day before the Federal Reserve hands down its latest pronouncement on monetary policy. This policy statement will almost certainly include a rate hike and some hints as to the Fed&#8217;s thinking for 2017. In a move that speaks volumes about the surging optimism in financial markets, investors and traders rushed to put yet more money in stocks and send the major indices to fresh all-time highs.<\/p>\n<p><center><br \/>\n<figure id=\"attachment_37322\" aria-describedby=\"caption-attachment-37322\" style=\"width: 540px\" class=\"wp-caption alignnone\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/12\/161213_SP500.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/12\/161213_SP500.png\" alt=\"The S&amp;P 500 (SPY) gained 0.7% to a new closing all-time high and a FIFTH day in a row trading at or above the upper-Bollinger Band (BB)\" width=\"550\" height=\"375\" class=\"size-full wp-image-37322\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/12\/161213_SP500.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/12\/161213_SP500-300x205.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-37322\" class=\"wp-caption-text\">The S&#038;P 500 (SPY) gained 0.7% to a new closing all-time high and a FIFTH day in a row trading at or above the upper-Bollinger Band (BB)<\/figcaption><\/figure><\/p>\n<p><figure id=\"attachment_37321\" aria-describedby=\"caption-attachment-37321\" style=\"width: 540px\" class=\"wp-caption alignnone\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/12\/161213_NASDAQ.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/12\/161213_NASDAQ.png\" alt=\"The NASDAQ (QQQ) gained 1.0% to a new all-time closing high although it pulled back from its upper-Bollinger Band (BB).\" width=\"550\" height=\"375\" class=\"size-full wp-image-37321\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/12\/161213_NASDAQ.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/12\/161213_NASDAQ-300x205.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-37321\" class=\"wp-caption-text\">The NASDAQ (QQQ) gained 1.0% to a new all-time closing high although it pulled back from its upper-Bollinger Band (BB).<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>The S&#038;P 500 (SPY) has created the very definition of an extended overbought rally by stretching to or above its upper-Bollinger Band for every day of this overbought period. The money rotation out of and back into tech stocks is abating now that the NASDAQ has joined the S&#038;P 500 in printing all-time highs. Several big cap tech stocks notched notable gains on the day: Amazon.com (AMZN) 1.8%, Facebook (FB) 2.2% (despite today&#8217;s gain, <a href=\"http:\/\/drduru.com\/onetwentytwo\/2016\/12\/02\/facebook-is-breaking-down\/\" target=\"_blank\">Facebook still looks like it is breaking down<\/a>), Apple (AAPL) 1.7%, and Intel (INTC) 2.3% stood out in particular. I REALLY like the 50DMA breakout on INTC. While I missed playing the perfect test of 200DMA support, I am looking forward to buying the dip.<\/p>\n<p><center><br \/>\n<figure id=\"attachment_37326\" aria-describedby=\"caption-attachment-37326\" style=\"width: 540px\" class=\"wp-caption alignnone\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/12\/161213_INTC.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/12\/161213_INTC.png\" alt=\"Intel (INTC) has bounced back sharply from an equally sharp retest of 200DMA support.\" width=\"550\" height=\"375\" class=\"size-full wp-image-37326\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/12\/161213_INTC.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/12\/161213_INTC-300x205.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-37326\" class=\"wp-caption-text\">Intel (INTC) has bounced back sharply from an equally sharp retest of 200DMA support.<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>With these gains, I expected <a href=\"http:\/\/drduru.com\/onetwentytwo\/t2108-resource-page\/\" target=\"_blank\">T2108<\/a>, the percentage of stocks trading above their respective 40-day moving averages (DMAs), to press further into overbought territory. I found instead that my favorite technical indicator is whispering warnings for financial markets. For the thrid day in a row, T2108 has gone nowhere even as the S&#038;P 500 has advanced two of these of three days. I find this bearish divergence particularly troubling ahead of the Federal Reserve&#8217;s meeting. This divergence represents a market hesitation and underlying weakening that is hidden by the bigger stocks that must be leading the advance in the major indices.<\/p>\n<p>Given this stall in T2108 I looked around at some usual suspects for more evidence. The iShares Russell 2000 (IWM) closed flat for the day and printed a technical pattern called a spinning top on Friday. Monday was a down day. Financial Select Sector SPDR ETF (XLF) closed with a paltry 0.3% gain and has gone nowhere for three days. SPDR S&#038;P Retail ETF (XRT) closed flat on the day and sold off the previous two days from a 16-month high. The iShares Transportation Average (IYT) closed with a 0.3% gain and topped out three trading days ago. In other words, do not let the major indices fool you: the underlying market has paused and given the Fed meeting its due respect.<\/p>\n<p>The volatility index, the VIX, has also paid its respects by increasing ever so slightly and gaining 4 out of the last 5 trading days after its last bottom.<\/p>\n<p><center><br \/>\n<figure id=\"attachment_37328\" aria-describedby=\"caption-attachment-37328\" style=\"width: 540px\" class=\"wp-caption alignnone\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/12\/161213_VIX.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/12\/161213_VIX.png\" alt=\"The volatility index, the VIX, has apparently refused to go any lower for now.\" width=\"550\" height=\"375\" class=\"size-full wp-image-37328\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/12\/161213_VIX.png 550w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/12\/161213_VIX-300x205.png 300w\" sizes=\"auto, (max-width: 550px) 100vw, 550px\" \/><\/a><figcaption id=\"caption-attachment-37328\" class=\"wp-caption-text\">The volatility index, the VIX, has apparently refused to go any lower for now.<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>The VIX is too low for me to bother fading volatility ahead of the Fed meeting as I like to do, but I stand ready to fade post-Fed volatility.<\/p>\n<p>The bearish divergence and the market hesitation convinced me to downgrade my short-term trading call to cautiously bullish. As a reminder of the T2108 trading rules on overbought conditions, I do not switch to bearish UNTIL T2108 drops out of overbought conditions or the S&#038;P 500 goes parabolic and forms a climactic topping pattern. In other words, I am NOT bearish even as strain to listen to the whispering warning from T2108. As a <em>small<\/em> precaution, I will sell my shares in ProShares Ultra S&#038;P500 (SSO) ahead of the Fed announcement. I was disappointed that the S&#038;P 500 never dipped in the overbought period and forced me to just jump in and buy; as a result I am sitting on a small gain. I will also lock in my surprisingly large gains in my April call options on iShares US Home Construction (ITB).<\/p>\n<p>As an example of my on-going bullishness, I went ahead and bought the big dips today in the commodity and industrial plays that have become extremely popular in this post-election rally. I am also preparing to buy any immediate post-Fed dips. I bought handfuls of call options in U.S. Steel (X), Cliffs Natural Resources (CLF), and Freeport-McMoran (FCX). X is 6.6% off its most recent high. CLF is down 11.2% off its most recent high and closed at 20DMA support. FCX is down 7.2% below its most recent high and has completely reversed the one-day surge that took the stock to that high. My positions in CLF and FCX are my second go-rounds in this post-election period. <\/p>\n<p>(For the most recent background on my general bullishness, see &#8220;<a href=\"http:\/\/drduru.com\/onetwentytwo\/2016\/12\/11\/stock-market-battle-of-sentiments-taxation-economic-optimism\/\" target=\"_blank\">A Stock Market Positioned to Win A Battle of Sentiments: Taxation Versus Economic Optimism<\/a>.&#8221;)<\/p>\n<p><center><br \/>\n<figure id=\"attachment_33404\" aria-describedby=\"caption-attachment-33404\" style=\"width: 461px\" class=\"wp-caption alignnone\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/03\/160301_T2108Over70Pct.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/03\/160301_T2108Over70Pct.png\" alt=\"S&amp;P 500 Performance By T2108 Duration Above the 70% Threshold\" width=\"471\" height=\"281\" class=\"size-full wp-image-33404\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/03\/160301_T2108Over70Pct.png 471w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2016\/03\/160301_T2108Over70Pct-300x179.png 300w\" sizes=\"auto, (max-width: 471px) 100vw, 471px\" \/><\/a><figcaption id=\"caption-attachment-33404\" class=\"wp-caption-text\">S&#038;P 500 Performance By T2108 Duration Above the 70% Threshold<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>&#8212; &#8211; &#8212;<br \/>\n<center><br \/>\n<strong>FOLLOW Dr. Duru&#8217;s commentary on financial markets via <a href=\"https:\/\/feedburner.google.com\/fb\/a\/mailverify?uri=onetwentytwo\" target=\"_blank\">email<\/a>, <a href=\"http:\/\/stocktwits.com\/DrDuru\" target=\"_blank\">StockTwits<\/a>, <a href=\"https:\/\/twitter.com\/DrDuru\" target=\"_blank\">Twitter<\/a>, and even <a href=\"https:\/\/www.instagram.com\/drduru_market_breadth\/\" target=\"_blank\">Instagram<\/a>!<\/strong><br \/>\n<\/center><\/p>\n<p><center><br \/>\n<strong>Daily T2108 vs the S&amp;P 500<\/strong><br \/>\n<a href=\"http:\/\/www.drduru.com\/money\/charts\/T2108-daily_s.png\"><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\" \/><\/a><\/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%)<br \/>\n<\/center><\/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\" \/><\/a><br \/>\n*<strong>All charts created using <\/strong><strong><a title=\"Freestockcharts.com\" href=\"http:\/\/www.freestockcharts.com\/\" target=\"_blank\">freestockcharts.com<\/a><\/strong> unless otherwise stated<\/center><\/p>\n<p>The charts above are the my LATEST updates independent of the date of this given T2108 post. For my latest T2108 post <a href=\"http:\/\/drduru.com\/onetwentytwo\/tag\/t2108\/\" target=\"_blank\">click here<\/a>.<\/p>\n<p>\n<strong>Related links:<\/strong><br \/>\n<a href=\"hhttp:\/\/drduru.com\/onetwentytwo\/about\/t2108-resource-page\/\">The T2108 Resource Page<\/a><\/p>\n<p>Be careful out there!<\/p>\n<p>Full disclosure: long SSO shares<\/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 (December 13, 2016) &#8211; Whispering Warnings for the S&#038;P 500 On December Fed Eve\" class=\"read-more\" href=\"https:\/\/drduru.com\/onetwentytwo\/2016\/12\/13\/t2108-update-161213\/\">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":[584,490,796,62],"tags":[222,413,535,65,362,226,303],"class_list":["post-37318","post","type-post","status-publish","format-standard","hentry","category-bollinger-band","category-overbought","category-semiconductors","category-technical-analysis","tag-intc","tag-nasdaq","tag-qqq","tag-sp-500","tag-spy","tag-t2108","tag-vix"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>T2108 Update (December 13, 2016) - Whispering Warnings for the S&amp;P 500 On December Fed Eve - 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\/2016\/12\/13\/t2108-update-161213\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"T2108 Update (December 13, 2016) - Whispering Warnings for the S&amp;P 500 On December Fed Eve - 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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