{"id":49880,"date":"2019-09-10T22:22:20","date_gmt":"2019-09-11T05:22:20","guid":{"rendered":"https:\/\/drduru.com\/onetwentytwo\/?p=49880"},"modified":"2019-09-11T06:29:41","modified_gmt":"2019-09-11T13:29:41","slug":"t2108-update-190910","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2019\/09\/10\/t2108-update-190910\/","title":{"rendered":"Small Caps Answer the Call: Overbought Trading Conditions Now Approach &#8211; Above the 40 (September 10, 2019)"},"content":{"rendered":"\n<p><strong>AT40<\/strong> = 62.1% of stocks are trading above their respective 40-day moving averages (DMAs) <br><strong>AT200<\/strong> = 55.2% of stocks are trading above their respective 200DMAs (finished reversing all of August&#8217;s decline)<br><strong>VIX<\/strong> = 15.2<br><strong>Short-term Trading Call<\/strong>: neutral<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Stock Market Commentary<\/strong><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Role reversal<\/strong><\/h3>\n\n\n\n<p>While the S&amp;P 500 (SPY) and the NASDAQ (COMPQX) continue to fail at confirming <a href=\"https:\/\/drduru.com\/onetwentytwo\/2019\/09\/08\/t2108-update-190906\/\">their recent obvious breakouts<\/a>, small caps, in the form of  iShares Russell 2000 Index Fund ETF (IWM), have suddenly shaken off their slumber. IWM helped to answer the questions left open in the wake of the leading breakouts from the major indices. IWM brightened the market&#8217;s bullish outlook by gaining 1.3% in a confirmation of support of its 200-day moving average (DMA) and by punching a 50DMA breakout.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img loading=\"lazy\" decoding=\"async\" width=\"550\" height=\"375\" src=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2019\/09\/190910_IWM.png\" alt=\"The iShares Russell 2000 Index Fund ETF (IWM) has surged through 200 and 50DMA resistance in a high-volume breakout move.\" class=\"wp-image-49882\"\/><figcaption>The iShares Russell 2000 Index Fund ETF (IWM) has surged through 200 and 50DMA resistance in a high-volume breakout move.<\/figcaption><\/figure><\/div>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img loading=\"lazy\" decoding=\"async\" width=\"550\" height=\"375\" src=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2019\/09\/190910_SP500.png\" alt=\"The S&amp;P 500 (SPY) ended the day flat as buyers rushed in near the bottom of the upper Bollinger Band (BB)\" class=\"wp-image-49883\"\/><figcaption>The S&amp;P 500 (SPY) ended the day flat as buyers rushed in near the bottom of the upper Bollinger Band (BB)<\/figcaption><\/figure><\/div>\n\n\n\n<p>Surprisingly, the NASDAQ (COMPQX) looked ready to fall into a bearish 50DMA breakdown. Perhaps only a 1.2% gain from Apple (AAPL) helped prop up the tech-laden index.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img loading=\"lazy\" decoding=\"async\" width=\"550\" height=\"375\" src=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2019\/09\/190910_NASDAQ.png\" alt=\"The NASDAQ (COMPQX) at one time broke down below 50DMA support but bounced near perfectly near 8000.\" class=\"wp-image-49884\"\/><figcaption>The NASDAQ (COMPQX) at one time broke down below 50DMA support but bounced near perfectly near 8000.<\/figcaption><\/figure><\/div>\n\n\n\n<p>Financials are pushing higher and carrying their weight again with the SPDRS Select Sector Financial ETF (XLF) starting the week confirming a 50DMA breakout. <\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img loading=\"lazy\" decoding=\"async\" width=\"550\" height=\"375\" src=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2019\/09\/190910_XLF.png\" alt=\"The SPDRS Select Sector Financial ETF (XLF) confirmed its 50DMA breakout and looks set to challenge the July high.\" class=\"wp-image-49885\"\/><figcaption>The SPDRS Select Sector Financial ETF (XLF) confirmed its 50DMA breakout and looks set to challenge the July high.<\/figcaption><\/figure><\/div>\n\n\n\n<br><script async=\"\" src=\"https:\/\/pagead2.googlesyndication.com\/pagead\/js\/adsbygoogle.js\"><\/script>\n<ins class=\"adsbygoogle\" style=\"display:block; text-align:center;\" data-ad-layout=\"in-article\" data-ad-format=\"fluid\" data-ad-client=\"ca-pub-1196033822186410\" data-ad-slot=\"3478942445\"><\/ins>\n<script>\n     (adsbygoogle = window.adsbygoogle || []).push({});\n<\/script><br>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Bullish Implications<\/strong><\/h3>\n\n\n\n<p>With small caps and financials suddenly accomplishing what the major indices are struggling to do, AT40 (T2108), the percentage of stocks trading above their respective 40DMAs, is suddenly soaring. My favorite technical indicator is out the neutral zone and closing in on the overbought threshold (70%). Perhaps even more importantly, AT200 (T2107), the percentage of stocks trading above their 200DMAs, closed the day at 55.2%. This longer-term indicator essentially reversed all its losses from the August sell-off. The move in AT200 strongly suggests that buyers will gather enough fuel to push the market right into overbought conditions (AT40 above 70%). At THAT point, an extended overbought rally goes into play. My short-term trading call will stay at neutral for the duration of this cycle given my expectations for at most a marginal new all-time high on the S&amp;P 500.<\/p>\n\n\n\n<p>The volatility index (VIX) is still flashing bullish signs. While the VIX is still hanging around its 15.35 pivot, it looks ready to continue its on-going implosion from the last highs.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img loading=\"lazy\" decoding=\"async\" width=\"550\" height=\"375\" src=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2019\/09\/190910_VIX.png\" alt=\"The volatility index (VIX) is stubbornly hugging close to its 15.35 pivot.\" class=\"wp-image-49887\"\/><figcaption>The volatility index (VIX) is stubbornly hugging close to its 15.35 pivot.<\/figcaption><\/figure><\/div>\n\n\n\n<p><a href=\"https:\/\/drduru.com\/onetwentytwo\/2018\/12\/01\/sp500-historic-october-drawdown-bled-into-november\/\">September&#8217;s tendency for notable drawdowns<\/a> remains an open wildcard.  The average maximum drawdown for the S&amp;P 500 in September since 1950 is 2.8%. September is the third worst month of the year on this score. This history is in a race against time versus the rush to challenge the AT40 overbought threshold. The charts below also remind me that there is still a very mixed environment with high-flyers suddenly falling off and even plunging from their perches.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Stock Chart Reviews &#8211; Bearish<\/strong><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Starbucks <\/strong>(SBUX)<\/h3>\n\n\n\n<p>Starbucks (SBUX) apparently fell in sympathy with the Wendy&#8217;s Company (WEN) which will serve up competition at breakfast time. These are times when being an expensive high-flying stuck appears a lot less attractive. SBUX fell 4.1% on a dramatic 50DMA breakdown. After July earnings, SBUX perfectly tapped $100 and drifted away from there until today&#8217;s sell-off.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img loading=\"lazy\" decoding=\"async\" width=\"550\" height=\"375\" src=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2019\/09\/190910_SBUX.png\" alt=\"Starbucks (SBUX) suffered a bearish 50DMA breakdown on a 4.1% one-day loss. The stock finished reversing all its post-earnings gains from July.\" class=\"wp-image-49894\"\/><figcaption>Starbucks (SBUX) suffered a bearish 50DMA breakdown on a 4.1% one-day loss. The stock finished reversing all its post-earnings gains from July.<\/figcaption><\/figure><\/div>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Wix.com<\/strong> (WIX)<\/h3>\n\n\n\n<p>Wix.com (WIX) is sliding toward its 200DMA support as sellers have managed to maintain the pressure after last month&#8217;s 50DMA breakdowns.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img loading=\"lazy\" decoding=\"async\" width=\"550\" height=\"375\" src=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2019\/09\/190910_WIX.png\" alt=\"Wix.com (WIX) has steadily sold off since its last 50DMA breakdown.\" class=\"wp-image-49888\"\/><figcaption>Wix.com (WIX) has steadily sold off since its last 50DMA breakdown.<\/figcaption><\/figure><\/div>\n\n\n\n<h2 class=\"wp-block-heading\"><strong> Stock Chart Reviews &#8211; Bullish<\/strong><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Chipotle Mexican Grill<\/strong> (CMG)<\/h3>\n\n\n\n<p>New York City is coming after Chipotle Mexican Grill (CMG) for unfair labor practices. The stock promptly fell 6.2% to close right on top of its 50DMA. The stock barely qualifies for the bullish column. CMG is back on my active radar for buying a bounce or chasing a 50DMA breakdown&#8230;<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img loading=\"lazy\" decoding=\"async\" width=\"550\" height=\"375\" src=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2019\/09\/190910_CMG.png\" alt=\"Chipotle Mexican Grill (CMG) tumbled hard out of an otherwise blissful stairstep higher and higher. CMG's 50DMA barely held as support in the wake of the 6.2% loss.\" class=\"wp-image-49895\"\/><figcaption>Chipotle Mexican Grill (CMG) tumbled hard out of an otherwise blissful stairstep higher and higher. CMG&#8217;s 50DMA barely held as support in the wake of the 6.2% loss.<\/figcaption><\/figure><\/div>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Deere &amp; Co<\/strong> (DE)<\/h3>\n\n\n\n<p>Deere &amp; Co (DE) is looking good again. The Trade War and troubles on U.S. farms are almost a distant memory with DE printing a 50DMA breakout.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img loading=\"lazy\" decoding=\"async\" width=\"550\" height=\"375\" src=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2019\/09\/190910_DE.png\" alt=\"Deere &amp; Co (DE) surged 3.6% for a 50DMA breakout and confirmation of 200DMA support.\" class=\"wp-image-49889\"\/><figcaption>Deere &amp; Co (DE) surged 3.6% for a 50DMA breakout and confirmation of 200DMA support.<\/figcaption><\/figure><\/div>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>DexCom<\/strong> (DXCM)<\/h3>\n\n\n\n<p>DexCom (DXCM) came off its all-time high with a quickness. Buyers finally stepped up to defend 200DMA support. I used this sell-off to buy shares and a call spread, but once again this persistently wild stock has me wavering on my bullish expectations.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img loading=\"lazy\" decoding=\"async\" width=\"550\" height=\"375\" src=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2019\/09\/190910_DXCM.png\" alt=\"DexCom (DXCM) suddenly suffered a 5-day sell-off that only slowed long enough for a bounce off 200DMA support.\" class=\"wp-image-49890\"\/><figcaption>DexCom (DXCM) suddenly suffered a 5-day sell-off that only slowed long enough for a bounce off 200DMA support.<\/figcaption><\/figure><\/div>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Nordstrom Inc<\/strong> (JWN)<\/h3>\n\n\n\n<p>Some kind of rotation is underway as a bread spectrum of retailers are catching bids. Nordstrom (JWN) jumped 4.5% today as part of a confirmation of last week&#8217;s 50DMA breakout. I have waited a long time for a fresh entry point in JWN. I bought last week&#8217;s breakout as a confirmation of the post-earnings gap up. JWN looks like it has a sustainable bottom, and I am targeting a challenge of declining 200DMA resistance.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img loading=\"lazy\" decoding=\"async\" width=\"550\" height=\"375\" src=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2019\/09\/190910_JWN.png\" alt=\"Nordstrom Inc (JWN) trades near a 4-month high and is challenging the May earnings gap down.\" class=\"wp-image-49899\"\/><figcaption>Nordstrom Inc (JWN) trades near a 4-month high and is challenging the May earnings gap down.<\/figcaption><\/figure><\/div>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Roku<\/strong> (ROKU)<\/h3>\n\n\n\n<p>I just finished <a href=\"https:\/\/drduru.com\/onetwentytwo\/2019\/09\/08\/t2108-update-190906\/\">singing the praises of the bullish run<\/a> in Roku (ROKU). Monday flashed a big warning sign with a topping bearish engulfing pattern. Apple&#8217;s announcement for Apple TV and its pricing confirmed some ROKU fears. I doubt the story is quite over for ROKU, so I am keeping the stock in the bullish column. Still, after a 2-day plunge like this, I do not like taking a swing until a successful challenge of 50DMA support.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img loading=\"lazy\" decoding=\"async\" width=\"550\" height=\"375\" src=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2019\/09\/190910_ROKU.png\" alt=\"Roku (ROKU) dropped 10.4% after news of Apple TV+ and its low $4.99\/month price point.\" class=\"wp-image-49891\"\/><figcaption>Roku (ROKU) dropped 10.4% after news of Apple TV+ and its low $4.99\/month price point.<\/figcaption><\/figure><\/div>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>The Wendy&#8217;s Company<\/strong> (WEN)<\/h3>\n\n\n\n<p>I sang the praises of The Wendy&#8217;s Company (WEN) in &#8220;<a href=\"https:\/\/drduru.com\/onetwentytwo\/2019\/08\/30\/how-to-invest-in-chicken-sandwiches\/\">How to Invest in Chicken Sandwiches: Popeyes and Wendy\u2019s<\/a>.&#8221; I wanted to wait for a pullback before buying into the stock&#8217;s out-performing run-up in August. One guidance cut later (Wendy&#8217;s is investing in a nationwide breakfast menu), and I have one heckuva pullback. I stuck to the plan and bought some shares around 50DMA support. I am primed to add more around the 200DMA if the opportunity occurs. (In related news, Wingstop (WING) cleaved right through 50DMA support and is already out of my bullish column).<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img loading=\"lazy\" decoding=\"async\" width=\"550\" height=\"375\" src=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2019\/09\/190910_WEN.png\" alt=\"The Wendy's Company (WEN) plunged 10.2% and closed below 50DMA support.\" class=\"wp-image-49892\"\/><figcaption>The Wendy&#8217;s Company (WEN) plunged 10.2% and closed below 50DMA support.<\/figcaption><\/figure><\/div>\n\n\n\n<p>&#8212; &#8211; &#8212;<br>\n<\/p>\n\n\n\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\" rel=\"noopener noreferrer\">email<\/a>, <a href=\"https:\/\/stocktwits.com\/DrDuru\" target=\"_blank\" rel=\"noopener noreferrer\">StockTwits<\/a>, <a href=\"https:\/\/twitter.com\/DrDuru\" target=\"_blank\" rel=\"noopener noreferrer\">Twitter<\/a>, and even <a href=\"https:\/\/www.instagram.com\/drduru_market_breadth\/\" target=\"_blank\" rel=\"noopener noreferrer\">Instagram<\/a>!<\/strong><br>\n<\/center>\n\n\n\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 rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\" href=\"https:\/\/www.worden.com\/CURRENTAFPROMO.aspx?AFCODE=866\" target=\"_blank\">Worden<\/a>. Learn more about T2108 on my <a href=\"https:\/\/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\n\n\n<p><strong>Active AT40 (T2108) periods<\/strong>: Day #167 over 20%, Day #6 over 30%, Day #18 over 40%, Day #2 over 50%, Day #1 over 60% (ending 32 days under 60%), Day #124 under 70%<\/p>\n\n\n\n<center><br>\n<strong>Daily AT40 (T2108)<\/strong><br>\n<figure><a href=\"https:\/\/www.drduru.com\/money\/charts\/T2108-daily_s.png\"><img loading=\"lazy\" decoding=\"async\" title=\"T2108 (DAILY)\" src=\"https:\/\/www.drduru.com\/money\/charts\/T2108-daily_s.png\" alt=\"\" width=\"500\" height=\"350\"><\/a><\/figure><p><\/p>\n<p>Black line: AT40 (T2108) (% measured on the right)<br>\nRed line: Overbought threshold (70%); Blue line: Oversold threshold (20%)<br>\n<\/p><\/center>\n\n\n\n<center><br>\n<strong>Weekly AT40 (T2108)<\/strong><br>\n<figure><a href=\"https:\/\/www.drduru.com\/money\/charts\/T2108-weekly_s.png\"><img loading=\"lazy\" decoding=\"async\" title=\"Weekly T2108\" src=\"https:\/\/www.drduru.com\/money\/charts\/T2108-weekly_s.png\" alt=\"Weekly T2108\" width=\"500\" height=\"350\"><\/a><\/figure><br>\n*<strong>All charts created using <\/strong><strong>FreeStockCharts<\/strong> unless otherwise stated<\/center>\n\n\n\n<p>The T2108 charts above are my LATEST updates independent of the date of this given AT40 post. For my latest AT40 post <a href=\"https:\/\/drduru.com\/onetwentytwo\/tag\/t2108\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\" (opens in a new tab)\">click here<\/a>.<\/p>\n\n\n\n<p>Be careful out there!<\/p>\n\n\n\n<p><strong>Full disclosure<\/strong>: long VIXY calls, long DE put spread, long WIX puts, long AAPL call spread, long DXCM shares and call spread, long JWN calls<\/p>\n\n\n\n<p>*Charting notes: FreeStockCharts stock prices are not adjusted for dividends. TradingView.com charts for currencies use Tokyo time as the start of the forex trading day. FreeStockCharts currency charts are based on Eastern U.S. time to define the trading day.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>AT40 = 62.1% of stocks are trading above their respective 40-day moving averages (DMAs) AT200 = 55.2% of stocks are trading above their respective 200DMAs (finished reversing all of August&#8217;s decline)VIX = 15.2Short-term Trading Call: neutral Stock Market Commentary Role reversal While the S&amp;P 500 (SPY) and the NASDAQ (COMPQX) continue to fail at confirming &#8230; <a title=\"Small Caps Answer the Call: Overbought Trading Conditions Now Approach &#8211; Above the 40 (September 10, 2019)\" class=\"read-more\" href=\"https:\/\/drduru.com\/onetwentytwo\/2019\/09\/10\/t2108-update-190910\/\">Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":49882,"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":[584,1303,483,482,1054,548,300,219,43,599,1312,512,338,1311,62],"tags":[1820,1819,746,1955,637,1942,909,802,413,1984,65,486,362,225,226,303,1368,311],"class_list":["post-49880","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-bollinger-band","category-bottom","category-breakdown","category-breakout","category-dining","category-financials","category-health-care","category-high-tech","category-industrial-sector","category-internet","category-manufacturing-2","category-resistance","category-retail","category-software","category-technical-analysis","tag-at200","tag-at40","tag-cmg","tag-compqx","tag-de","tag-dxcm","tag-iwm","tag-jwn","tag-nasdaq","tag-roku","tag-sp-500","tag-sbux","tag-spy","tag-t2107","tag-t2108","tag-vix","tag-wix","tag-xlf"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Small Caps Answer the Call: Overbought Trading Conditions Now Approach - Above the 40 (September 10, 2019) - 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\/2019\/09\/10\/t2108-update-190910\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Small Caps Answer the Call: Overbought Trading Conditions Now Approach - Above the 40 (September 10, 2019) - ONE-TWENTY TWO: Trading Financial Markets\" \/>\n<meta property=\"og:description\" content=\"AT40 = 62.1% of stocks are trading above their respective 40-day moving averages (DMAs) AT200 = 55.2% of stocks are trading above their respective 200DMAs (finished reversing all of August&#8217;s decline)VIX = 15.2Short-term Trading Call: neutral Stock Market Commentary Role reversal While the S&amp;P 500 (SPY) and the NASDAQ (COMPQX) continue to fail at confirming ... 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