{"id":41018,"date":"2017-09-28T23:04:24","date_gmt":"2017-09-29T06:04:24","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=41018"},"modified":"2017-09-28T23:04:24","modified_gmt":"2017-09-29T06:04:24","slug":"t2108-update-170928","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2017\/09\/28\/t2108-update-170928\/","title":{"rendered":"Above the 40 (September 28, 2017) &#8211; A Stock Market Finally Overbought Again"},"content":{"rendered":"<p><strong>AT40<\/strong> = 70.1% of stocks are trading above their respective 40-day moving averages (DMAs) &#8211; first overbought day<br \/>\n<strong>AT200<\/strong> = 58.7% of stocks are trading above their respective 200DMAs<br \/>\n<strong>VIX<\/strong> = 9.5<br \/>\n<strong>Short-term Trading Call<\/strong>: cautiously bullish (one more higher close away from bullish)<\/p>\n<p><strong>Commentary<\/strong><br \/>\nIt took 8 months for the stock market to hit overbought again. AT40 (T2108), the percentage of stocks trading above their 40-day moving averages (DMAs), closed at 70.1% &#8211; a hair above the overbought threshold of 70%. After one more higher close I will switch the short-term trading call to bullish.<\/p>\n<p>The S&#038;P 500 (SPY) is up an incredible 9.2% since <a href=\"http:\/\/drduru.com\/onetwentytwo\/2017\/01\/26\/t2108-update-170125\/\" rel=\"noopener\" target=\"_blank\">the last overbought period ended<\/a> (it lasted just one day on January 25, 2017). This performance is a large outlier. Not only has AT40 rarely spent anything close to 160 trading days under 70%, but also only TWO other 70% underperiods have performed as well as this last one did. The chart below shows a projected performance under 5% for a 70% underperiod surviving as long as the the last one.<\/p>\n<p><center><br \/>\n<figure id=\"attachment_26453\" aria-describedby=\"caption-attachment-26453\" style=\"width: 461px\" class=\"wp-caption alignnone\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/01\/150109_SP500Perf_T2108Under70Pct.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/01\/150109_SP500Perf_T2108Under70Pct.png\" alt=\"The last AT40 70% underperiod was an outlier both by duration and performance.\" width=\"471\" height=\"281\" class=\"size-full wp-image-26453\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/01\/150109_SP500Perf_T2108Under70Pct.png 471w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/01\/150109_SP500Perf_T2108Under70Pct-300x179.png 300w\" sizes=\"auto, (max-width: 471px) 100vw, 471px\" \/><\/a><figcaption id=\"caption-attachment-26453\" class=\"wp-caption-text\">The last AT40 70% underperiod was an outlier both by duration and performance.<\/figcaption><\/figure><br \/>\n<\/center> <\/p>\n<p>Separately, AT40 has now gone 401 days without trading below the oversold threshold of 20%. This duration ties for third longest trading period without an oversold period. The last oversold period ended on February 12, 2016 in what I dubbed at the time the &#8220;<a href=\"http:\/\/drduru.com\/onetwentytwo\/2016\/02\/13\/t2108-update-160212\/\" rel=\"noopener\" target=\"_blank\">JP Morgan Chase Bottom<\/a>.&#8221; The S&#038;P 500 has gained 32% since then. Projected performance suggests that the end of this 20% overperiod might cut this gain almost in half&#8230;with a heavy caveat given the sparseness of data that comes with such an outlier occurrence. <\/p>\n<p><center><br \/>\n<figure id=\"attachment_32100\" aria-describedby=\"caption-attachment-32100\" style=\"width: 461px\" class=\"wp-caption alignnone\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/12\/151211_SP500T210820pctOverperiod.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/12\/151211_SP500T210820pctOverperiod.png\" alt=\"S&amp;P 500 historical performance during the T2108 20% overperiod.\" width=\"471\" height=\"281\" class=\"size-full wp-image-32100\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/12\/151211_SP500T210820pctOverperiod.png 471w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2015\/12\/151211_SP500T210820pctOverperiod-300x179.png 300w\" sizes=\"auto, (max-width: 471px) 100vw, 471px\" \/><\/a><figcaption id=\"caption-attachment-32100\" class=\"wp-caption-text\">S&#038;P 500 historical performance during the T2108 20% overperiod.<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>Appropriately, the S&#038;P 500 (SPY) marked this overdue overbought occasion with a new all-time high.<\/p>\n<p><center><br \/>\n<figure id=\"attachment_41021\" aria-describedby=\"caption-attachment-41021\" style=\"width: 540px\" class=\"wp-caption alignnone\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2017\/09\/170928_SP500.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2017\/09\/170928_SP500.png\" alt=\"The S&amp;P 500 (SPY) looks poised to next tag the top its upper-Bollinger Band (BB) channel.\" width=\"550\" height=\"423\" class=\"size-full wp-image-41021\" \/><\/a><figcaption id=\"caption-attachment-41021\" class=\"wp-caption-text\">The S&#038;P 500 (SPY) looks poised to next tag the top its upper-Bollinger Band (BB) channel.<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>The NASDAQ closed flatline and just short of a fresh all-time high. The PowerShares QQQ ETF (QQQ) is still struggling to hold onto its 50DMA support. Assuming AT40 confirms a new bullish phase for the market, I will likely load up on QQQ call options. My swing at individual members of the big cap high tech stocks this week had very mixed results.<\/p>\n<p>The volatility index, the VIX, hit 9.6, within a small fraction of a point of the 24-year closing low set in July and the all-time (tracked) closing low of 9.31 on December 22, 1993. My last tranche of call options on the ProShares Ultra VIX Short-Term Futures (UVXY) will expire worthless, and I will reload for hedging against the potential for October to deliver fresh surprises.<\/p>\n<p><strong>STOCK CHART REVIEWS<\/strong><\/p>\n<p><strong>First Solar<\/strong> (FSLR)<br \/>\nIt looks like I locked in profits on my FSLR call options just in time. FSLR began the week by immediately reversing Friday&#8217;s breakout and in turn broke 50DMA support. I will not take another swing until\/unless the company can close above its 50DMA again.<\/p>\n<p><center><br \/>\n<figure id=\"attachment_41024\" aria-describedby=\"caption-attachment-41024\" style=\"width: 540px\" class=\"wp-caption alignnone\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2017\/09\/170928_FSLR.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2017\/09\/170928_FSLR.png\" alt=\"First Solar (FSLR) is pivoting around its 50DMA but flirting with a confirmed breakdown.\" width=\"550\" height=\"430\" class=\"size-full wp-image-41024\" \/><\/a><figcaption id=\"caption-attachment-41024\" class=\"wp-caption-text\">First Solar (FSLR) is pivoting around its 50DMA but flirting with a confirmed breakdown.<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>Hanging in the balance is the fate and impact of solar panel tariffs.<\/p>\n<p><strong>IHS Markit<\/strong> (INFO)<br \/>\nOn Tuesday, INFO gave what seemed to me a reassuring reaffirmation of guidance. The market disagreed. INFO gapped down below its 50DMA support and kept selling off. Like the dip in July, this selling reversed my gains. I will next look for 200DMA support to hold.<\/p>\n<p><center><br \/>\n<figure id=\"attachment_41025\" aria-describedby=\"caption-attachment-41025\" style=\"width: 540px\" class=\"wp-caption alignnone\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2017\/09\/170928_INFO.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2017\/09\/170928_INFO.png\" alt=\"Markit (INFO) took a major post-earnings blow that likely signals it will top out for a while.\" width=\"550\" height=\"426\" class=\"size-full wp-image-41025\" \/><\/a><figcaption id=\"caption-attachment-41025\" class=\"wp-caption-text\">Markit (INFO) took a major post-earnings blow that likely signals it will top out for a while.<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p><strong>Model N<\/strong> (MODN)<br \/>\n<a href=\"https:\/\/seekingalpha.com\/article\/1913421-model-n-a-potential-comeback-story-for-2014-and-beyond\" rel=\"noopener\" target=\"_blank\">I last wrote about Model N<\/a> (MODN) almost four years ago. I flagged <a href=\"http:\/\/investor.modeln.com\/CorporateProfile\" rel=\"noopener\" target=\"_blank\">the revenue management company<\/a> as a bet on a comeback story. The stock never took off but did deliver a small profit on a rally to the top of what became a very extended trading range. Now, MODN is FINALLY breaking out, and it has my attention again. At $15, MODN sits at a 4-year high. The next earnings report comes around November 6th so there could be a long runway here if the general market remains bullish.<\/p>\n<p><center><br \/>\n<figure id=\"attachment_41027\" aria-describedby=\"caption-attachment-41027\" style=\"width: 540px\" class=\"wp-caption alignnone\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2017\/09\/170928_MODN.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2017\/09\/170928_MODN.png\" alt=\"Model N (MODN) finally broke out from a very tight trading range in place since May.\" width=\"550\" height=\"420\" class=\"size-full wp-image-41027\" \/><\/a><figcaption id=\"caption-attachment-41027\" class=\"wp-caption-text\">Model N (MODN) finally broke out from a very tight trading range in place since May.<\/figcaption><\/figure><\/p>\n<p><figure id=\"attachment_41026\" aria-describedby=\"caption-attachment-41026\" style=\"width: 540px\" class=\"wp-caption alignnone\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2017\/09\/170928_MODN-weekly.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2017\/09\/170928_MODN-weekly.png\" alt=\"Model N (MODN) was trapped in a longer-term (sloppy) trading range in place since its big collapse in 2013. Is the recovery finally underway?\" width=\"550\" height=\"421\" class=\"size-full wp-image-41026\" \/><\/a><figcaption id=\"caption-attachment-41026\" class=\"wp-caption-text\">Model N (MODN) was trapped in a longer-term (sloppy) trading range in place since its big collapse in 2013. Is the recovery finally underway?<\/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>&#8220;Above the 40&#8221; uses the percentage of stocks trading above their respective 40-day moving averages (DMAs) to assess the technical health of the stock market and to identify extremes in market sentiment that are likely to reverse. Abbreviated as AT40, Above the 40 is an alternative label for &#8220;T2108&#8221; which was created by <a href=\"http:\/\/www.worden.com\/CURRENTAFPROMO.aspx?AFCODE=866\" target=\"_blank\">Worden<\/a>. Learn more about T2108 on my <a href=\"http:\/\/drduru.com\/onetwentytwo\/about\/t2108-resource-page\/\">T2108 Resource Page<\/a>. AT200, or T2107, measures the percentage of stocks trading above their respective 200DMAs.<\/p>\n<p><strong>Active AT40 (T2108) periods<\/strong>: Day #401 over 20%, Day #215 over 30%, Day #15 over 40%, Day #14 over 50%, Day #10 over 60%, Day #1 over 70% (overbought, ending 160 days under 70%)<\/p>\n<p><center><br \/>\n<strong>Daily AT40 (T2108)<\/strong><br \/>\n<a href=\"http:\/\/www.drduru.com\/money\/charts\/T2108-daily_s.png\"><img loading=\"lazy\" decoding=\"async\" title=\"T2108 (DAILY)\" src=\"http:\/\/www.drduru.com\/money\/charts\/T2108-daily_s.png\" alt=\"\" width=\"500\" height=\"350\" \/><\/a><\/p>\n<p>Black line: AT40 (T2108) (% measured on the right)<br \/>\nRed line: Overbought threshold (70%); Blue line: Oversold threshold (20%)<br \/>\n<\/center><\/p>\n<p><center><br \/>\n<strong>Weekly AT40 (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 my LATEST updates independent of the date of this given AT40 post. For my latest AT40 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><br \/>\nYou can <a href=\"http:\/\/twitter.com\/#!\/search\/%23T2108\">follow real-time T2108 commentary<\/a> on twitter using the #T2108 or #AT40 hashtags. 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>.<\/p>\n<p>Be careful out there!<\/p>\n<p>Full disclosure: long INFO, long UVXY call options<\/p>\n<p>*Charting notes: FreeStockCharts.com uses midnight U.S. Eastern time as the close for currencies. Stock prices are not adjusted for dividends.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>AT40 = 70.1% of stocks are trading above their respective 40-day moving averages (DMAs) &#8211; first overbought day AT200 = 58.7% of stocks are trading above their respective 200DMAs VIX = 9.5 Short-term Trading Call: cautiously bullish (one more higher close away from bullish) Commentary It took 8 months for the stock market to hit &#8230; <a title=\"Above the 40 (September 28, 2017) &#8211; A Stock Market Finally Overbought Again\" class=\"read-more\" href=\"https:\/\/drduru.com\/onetwentytwo\/2017\/09\/28\/t2108-update-170928\/\">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":[490,491,62],"tags":[7,1847,1279,65,362,303],"class_list":["post-41018","post","type-post","status-publish","format-standard","hentry","category-overbought","category-oversold","category-technical-analysis","tag-fslr","tag-info","tag-modn","tag-sp-500","tag-spy","tag-vix"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Above the 40 (September 28, 2017) - A Stock Market Finally Overbought Again - 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\/2017\/09\/28\/t2108-update-170928\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Above the 40 (September 28, 2017) - A Stock Market Finally Overbought Again - ONE-TWENTY TWO: Trading Financial Markets\" \/>\n<meta property=\"og:description\" content=\"AT40 = 70.1% of stocks are trading above their respective 40-day moving averages (DMAs) &#8211; first overbought day AT200 = 58.7% of stocks are trading above their respective 200DMAs VIX = 9.5 Short-term Trading Call: cautiously bullish (one more higher close away from bullish) Commentary It took 8 months for the stock market to hit ... 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first overbought day AT200 = 58.7% of stocks are trading above their respective 200DMAs VIX = 9.5 Short-term Trading Call: cautiously bullish (one more higher close away from bullish) Commentary It took 8 months for the stock market to hit ... 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