{"id":42990,"date":"2018-03-10T20:32:00","date_gmt":"2018-03-11T04:32:00","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=42990"},"modified":"2018-03-10T20:37:23","modified_gmt":"2018-03-11T04:37:23","slug":"t2108-update-180309","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2018\/03\/10\/t2108-update-180309\/","title":{"rendered":"Above the 40 (March 9, 2018) – Stock Market Returns To Its Originally Scheduled Programming"},"content":{"rendered":"

AT40<\/strong> = 48.5% of stocks are trading above their respective 40-day moving averages (DMAs)
\nAT200<\/strong> = 52.9% of stocks are trading above their respective 200DMAs
\nVIX<\/strong> = 14.6 (11.5% drop)
\nShort-term Trading Call<\/strong>: bullish<\/p>\n

Commentary<\/strong>
\nThe (expected) plunge in the volatility index, the VIX, says it all…the stock market is ready to return to its originally scheduled programming.<\/p>\n


\n
\"The<\/a>
The volatility index, the VIX, broke down below the 15.35 pivot line a day after bouncing perfectly off its magic number pivot.<\/figcaption><\/figure>
\n<\/center><\/p>\n

It was a news-filled week and almost everything worked toward relieving market anxieties: President Trump announced tariffs that represented concessions to political and economic pressures<\/a>; the jobs report for February delivered a goldilocks report with a bushel full of jobs, minor wage inflation, and a monthly increase in the size of the labor force that was last this large 35 years ago; and a surprise bonus with North Korea claiming it is ready to negotiate denuclearization of the Korean peninsula. Essentially every significant and palpable negative headwind whisked right off the market’s radar.<\/p>\n

I used this occasion to cover my short in the iPath S&P 500 VIX ST Futures ETN (VXX). While I was bolstered by a hedge with call options in the ProShares Ultra VIX Short-Term Futures (UVXY), I was determined to fade VXX given what I saw as the high certainty of an imminent volatility implosion<\/a>. I will continue this fading strategy if VXX shares remain available for shorting. However, I highly suspect the short volatility trade will get very popular all over again. Note that VXX has yet to reverse all its gains from the day the VIX soared at its highest percentage in history<\/a>. I am still projecting an eventual complete reversal and more.<\/p>\n


\n
\"The<\/a>
The iPath S&P 500 VIX ST Futures ETN (VXX) closed at its lowest point since the VIX’s historic surge.<\/figcaption><\/figure>
\n<\/center><\/p>\n

Part of the stock market’s original programming is to achieve all-time highs. The NASDAQ and the PowerShares QQQ ETF (QQQ) answered the casting call with 1.8% and 1.9% gains respectively. The S&P 500 (SPY) is scrambling to catch-up with a 1.7% gain that represents a convincing breakout above its 50-day moving average (DMA) and its highest close since February’s job report.<\/p>\n


\n
\"The<\/a>
The NASDAQ powered its way to a new all-time high and delivered a resounding confirmation of its latest test of 50DMA support.<\/figcaption><\/figure><\/p>\n
\"The<\/a>
The PowerShares QQQ ETF (QQQ) delivered its own all-time high and convincingly invalidated the bearish engulfing pattern that preceded the test of 50DMA support.<\/figcaption><\/figure>\n

\"The<\/a>
The S&P 500 (SPY) broke out from 50DMA resistance and offers a lot more upside for a rendezvous with its all-time high.<\/figcaption><\/figure>
\n<\/center><\/p>\n

The iShares Russell 2000 ETF (IWM) gained 1.6% and is just a point away from its all-time closing high.<\/p>\n

I am frankly surprised that any of the major indices could pull off a new all-time high so soon after February’s breakdown<\/a>. I just assumed the S&P 500 would be stuck between its all-time high and its picture-perfect test of 200DMA support for several months to come. Now I have to take a new all-time high seriously. Accordingly, I bumped the short-term trading call from neutral all the way to bullish. I reloaded on SPY shares and calls. The easy stop loss is a close below the 50DMA. Note that this trade is not about anticipating some new catalyst to boost the stock market yet higher. This trade is about the return of regularly scheduled programming; the resumption of the previous momentum that rode on narratives of high consumer confidence, a strengthening American economy, and robust global growth.<\/p>\n

AT40 (T2108), the percentage of stocks trading above their respective 40DMAs, confirmed the bullish day by soaring from 39.5% to 48.4%. This level is its highest since the February jobs report. AT200 (T2107), the percentage of stocks trading above their respective 200DMAs, is back above 50% and a marginal new high for this bounce from oversold conditions.<\/p>\n

The currency markets are also on board with the refreshed bullish sentiment. The Australian dollar soared across the board. AUD\/JPY almost gained 1% in what looks like a confirmation of a successful test of the April, 2017 intraday low (you just can’t make this stuff up!). I still grew my short AUD\/JPY position as a hedge while I get busy with bullish trades elsewhere in forex.<\/p>\n


\n
\"AUD\/JPY<\/a>
AUD\/JPY likely confirmed a bottom, but it has a long way to go to invalidate its head and shoulders top.<\/figcaption><\/figure>
\n<\/center><\/p>\n

CHART REVIEWS<\/strong>
\niPath Bloomberg Cocoa SubTR ETN<\/strong> (NIB)<\/p>\n

\n

Sold core position in $NIB<\/a>. It was a wild ride since last year! Will be buying dips…assuming another one comes! #cocoa<\/a> pic.twitter.com\/Njw3ahmRuK<\/a><\/p>\n

— Dr. Duru (@DrDuru) March 8, 2018<\/a><\/p><\/blockquote>\n