{"id":38065,"date":"2017-02-14T01:17:35","date_gmt":"2017-02-14T09:17:35","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=38065"},"modified":"2017-02-14T01:17:35","modified_gmt":"2017-02-14T09:17:35","slug":"t2108-update-170213","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2017\/02\/14\/t2108-update-170213\/","title":{"rendered":"Above the 40 (February 13, 2017) – S&P 500 Follow-Through Finally Ends Bearish Divergence"},"content":{"rendered":"

AT40 Status<\/strong>: 66.4% of stocks are trading above their respective 40-day moving averages (DMAs)
\nAT200 Status<\/strong>: 69.9% of stocks are trading above their respective 200DMAs
\nVIX Status<\/strong>: 11.1 (volatility index)
\nShort-term Trading Call<\/strong>: neutral<\/p>\n

Commentary<\/strong>
\nFor the first time since December, the S&P 500 (SPY) has displayed strong follow-through to a break out to fresh all-time highs. <\/p>\n


\n
\"The<\/a>
The S&P 500 is ramping along its outermost upper-Bollinger Band.<\/figcaption><\/figure>
\n<\/center><\/p>\n

Buyers have been strong enough to hit the upper-Bollinger Band (BB) three days in a row. Indeed, the BB is opening up to a near parabolic move on the index. I am on watch now for a climactic buying frenzy. <\/p>\n

AT40 (T2108)<\/a>, the percentage of stocks trading above their respective 40-day moving averages (DMAs), traded as high as 68.0% but settled for a more marginal gain at 66.4%. AT40 has finally broken through the downtrend that kept it in a bearish divergence from the S&P 500 (SPY), but the tentativeness at the overbought boundary (70%) prevented confirmation.<\/p>\n


\n
\"AT40<\/a>
AT40 (T2108) broke out from the short-term downtrend but did not quite reach overbought levels.<\/figcaption><\/figure>
\n<\/center><\/p>\n

Per my AT40 trading rules, a return to overbought levels SHOULD be bullish. As I have mentioned in earlier posts, even if such a bullish move occurs, I plan to leave the short-term trading call at neutral: the previous bearish divergence was long enough and the volatility is low enough to keep me wary. Note well that I greatly reduced my concern about extremely low volatility after analyzing the historical data in “The Surprising Implications of Periods of Extremely Low Volatility<\/a>.”<\/p>\n

The volatility index, the VIX, actually managed to gain a bit even as the entire stock market shot into rally mode. The gain was small enough to leave the current downtrend remained well intact.<\/p>\n


\n
\"The<\/a>
The volatility index, the VIX, gapped up and stayed positive all day despite the day’s rally in financial markets.<\/figcaption><\/figure>
\n<\/center><\/p>\n

With the market in rally mode, my post-earnings play<\/a> on Amazon.com (AMZN) worked out nicely ahead of its 2-week schedule. AMZN closed up 1.1% after completing a post-earnings reversal and almost touching its all-time high. I closed out the trade and took profits.<\/p>\n


\n
\"Amazon.com<\/a>
Amazon.com (AMZN) wasted little time in reversing its entire post-earnings loss.<\/figcaption><\/figure>
\n<\/center><\/p>\n

I also reached back into the archives<\/a> in accumulating call options on Intel (INTC). Support at the 50DMA broke decisively after INTC provided guidance at an analyst day last week. Per plan, I doubled down on my position with INTC retesting support at its 200DMA the following day. I am now looking for a repeat of early December’s picture-perfect test of 200DMA support and subsequent rally.<\/p>\n


\n
\"Intel<\/a>
Intel (INTC) bounced off 200DMA support again: did this move bring an end to post-earnings selling?<\/figcaption><\/figure><\/p>\n