{"id":4248,"date":"2011-03-08T03:03:32","date_gmt":"2011-03-08T08:03:32","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=4248"},"modified":"2011-03-08T03:03:32","modified_gmt":"2011-03-08T08:03:32","slug":"market-wobbles-remains-unbroken","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2011\/03\/08\/market-wobbles-remains-unbroken\/","title":{"rendered":"Stock Market Wobbles But Remains Unbroken"},"content":{"rendered":"

The stock market has churned and gone nowhere for 10 trading days, a distinct break in the steady drip upward that saw traders, investors, and even trading-bots seizing upon nearly every dip as a buying opportunity<\/a>. For six months a very basic equation has dominated: printing money = higher stock prices. For now, a conditional has inserted itself into this equation: if oil prices rise higher past $100\/barrel, then think at least twice. It is too soon to guess when market participants might begin to anticipate a QE3 that prints enough money to pay the higher gasoline bills, but I will not be surprised if we find out the Federal Reserve is considering such an option (in effect, not directly, of course) given its extreme fear of a stalled recovery.<\/p>\n

The stock market’s current wobble is similar to the wavering in November. Bear versus bull battle lines are being drawn that, just like in November<\/a>, clearly separate another breakout from a rare breakdown. <\/p>\n

(Click for a larger view)
\n


\n
\"S&P<\/a>
S&P 500 wobbles as support remains firm<\/figcaption><\/figure>
\n<\/center>
\n<\/p>\n

The breakout in November was quite clean. The S&P 500 tested the 50DMA, even broke below it, but never closed below that important support line – after two consecutive days of testing, the index was off to the races. I will be very surprised if such a clean breakout or breakdown occurs this time just since the main catalyst is itself so volatile. However, I will be applying the exact same criteria to determine the next definitive move. <\/p>\n

The most intriguing difference between November and the current test of support is T2108<\/a>, the percentage of stocks trading above their 40DMAs. In November, T2108 seemed headed for oversold conditions while getting as low as 40% or so. Now, T2108 has bounced in and out of overbought territory (70% or higher) with each trip into overbought territory leading into the next sell-off (I chronicled most of this action on my T2108 resource page<\/a>). Now, T2108 = 61% and is coming off a two-day stint in overbought territory. <\/p>\n

I had earlier claimed that the next trip into overbought territory would be the last for the S&P 500 for a while<\/a>. However, the market just exited its second stay in overbought territory since I made those claims. Apparently, the determination to buy stocks remains strong even with oil on the rise. Bears should duly note this behavior: if the oil squeeze gets lifted anytime soon for some reason, the stock market could lift very swiftly. This probably explains why puts and volatility still seem so “cheap” to me.<\/p>\n

I close with this graph of the long-suffering VXX, the iPath S&P 500 VIX Short-Term Futures. It looks like a potential bottoming process (short-term of course) is underway:<\/p>\n


\n
\"VXX<\/a>
VXX makes a rare attempt to bottom<\/figcaption><\/figure>
\n*All charts created using TeleChart:<\/strong> <\/a>
\n<\/center>
\n<\/p>\n

Be careful out there!<\/p>\n

Full disclosure: long SSO puts, long VXX<\/p>\n","protected":false},"excerpt":{"rendered":"

The stock market has churned and gone nowhere for 10 trading days, a distinct break in the steady drip upward that saw traders, investors, and even trading-bots seizing upon nearly every dip as a buying opportunity. For six months a very basic equation has dominated: printing money = higher stock prices. For now, a conditional … 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":[62],"tags":[177,480,65,446,226,1597,178,120],"class_list":["post-4248","post","type-post","status-publish","format-standard","hentry","category-technical-analysis","tag-ipath-sp-500-vix-short-term-futures","tag-pro-shares-ultra-sp-500","tag-sp-500","tag-sso","tag-t2108","tag-technical-analysis","tag-volatility","tag-vxx"],"yoast_head":"\nStock Market Wobbles But Remains Unbroken - 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\/2011\/03\/08\/market-wobbles-remains-unbroken\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Stock Market Wobbles But Remains Unbroken - ONE-TWENTY TWO: Trading Financial Markets\" \/>\n<meta property=\"og:description\" content=\"The stock market has churned and gone nowhere for 10 trading days, a distinct break in the steady drip upward that saw traders, investors, and even trading-bots seizing upon nearly every dip as a buying opportunity. 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