{"id":5574,"date":"2011-06-17T22:47:00","date_gmt":"2011-06-18T02:47:00","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=5574"},"modified":"2011-06-18T13:30:33","modified_gmt":"2011-06-18T17:30:33","slug":"t2108-update-110617","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2011\/06\/17\/t2108-update-110617\/","title":{"rendered":"T2108 Update &#8211; June 17, 2011"},"content":{"rendered":"<p>(T2108 measures the percentage of stocks trading above their respective 40-day moving averages [DMAs]. To learn more about it, see my <a href=\"http:\/\/www.drduru.com\/money\/T2108.htm\">T2108 Resource Page<\/a>.)<\/p>\n<p><strong>T2108 Status<\/strong>: 21% and neutral (ending 2 days of oversold conditions).<br \/>\n<strong>VIX Status<\/strong>: 22; higher than the start of last oversold period (19).<br \/>\n<strong>General (Short-term) Trading Call<\/strong>: Hold, assuming trading longs were purchased during oversold period. (See below for more).<\/p>\n<p><strong>Commentary<\/strong><\/p>\n<p>T2108 rose slightly to 21%, ending the last oversold period at two days in duration (recall that historically 56% of all oversold periods end after 1 or 2 days). The S&#038;P 500 ended the day nearly flat after steadily selling off for most of the day. Overall, this was a very poor follow-through to conditions that looked ripe for a nice oversold bounce or relief rally. Both conservative and aggressive swing traders should have picked up long positions over this two-day long oversold period (see <a href=\"http:\/\/drduru.com\/onetwentytwo\/2011\/06\/16\/t2108-update-110616\/\">yesterday&#8217;s T2108 update<\/a> for more), but today&#8217;s underwhelming showing means that these positions should not be held for long. Hopefully, we get a strong pop on Monday as venting from all the positioning of options expiration.<\/p>\n<p>I will now examine three stocks that I think summarize the strange dichotomy I saw in the market today: Apple (AAPL), Google (GOOG), and Flowserve (FLS). All three highlight the risks and the promise of speculating on oversold conditions. Note well that Friday was an options expiration day featuring &#8220;quadruple witching.&#8221; Thus, today&#8217;s observations likely come with a larger than usual amount of uncertainty.<\/p>\n<p><strong>Apple (AAPL)<\/strong><br \/>\nAAPL registered a poor performance today. The stock continued <a href=\"http:\/\/drduru.com\/onetwentytwo\/2011\/06\/13\/rare-test-for-apple\/\">the relative underperformance I noted earlier this week<\/a>. Today, AAPL failed to follow through on <a href=\"http:\/\/drduru.com\/onetwentytwo\/2011\/06\/17\/aapl-ewz-ewa\/\">its nice bounce from yesterday&#8217;s oversold lows<\/a>. AAPL began the day in promising fashion by gapping up 2 points, but it was a disappointing trip downhill for the rest of the day. AAPL closed with a 1.5% loss, finishing the day below its 200-day moving average (DMA) and at a new 2011 closing low. The NASDAQ also traded below its 200DMA for a new 2011 closing low, but the technology-laden index finished with just a 0.3% loss.<\/p>\n<p>AAPL&#8217;s behavior is a very bearish, ominous sign given it is widely held. Nonetheless, in the middle of the slide, I decided to make AAPL one of my plays for an oversold bounce &#8211; high risk, high potential reward.<\/p>\n<p><strong>Google (GOOG)<\/strong><br \/>\nCompared to AAPL&#8217;s stomachache, GOOG nearly experienced cardiac arrest. GOOG dropped 3% as the presumed options &#8220;pin action&#8221; around $500 failed to provide the stock any support. GOOG&#8217;s close at $485 puts it at a 9-month low. The stock has lost over 80% of its gains since the August, 2010 lows (also known as the QE2 lows).<\/p>\n<p><center><br \/>\n<figure id=\"attachment_5578\" aria-describedby=\"caption-attachment-5578\" style=\"width: 515px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2011\/06\/110617_GOOG.jpg\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2011\/06\/110617_GOOG.jpg\" alt=\"Google has been stuck in a downtrend all year. Could Friday mark a climax or the strongest warning yet?\" title=\"Google has been stuck in a downtrend all year. Could Friday mark a climax or the strongest warning yet?\" width=\"525\" height=\"469\" class=\"size-full wp-image-5578\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2011\/06\/110617_GOOG.jpg 525w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2011\/06\/110617_GOOG-300x268.jpg 300w\" sizes=\"auto, (max-width: 525px) 100vw, 525px\" \/><\/a><figcaption id=\"caption-attachment-5578\" class=\"wp-caption-text\">Google has been stuck in a downtrend all year. Could Friday mark a climax or the strongest warning yet?<\/figcaption><\/figure><br \/>\n<\/center><br \/>\n<\/p>\n<p>I bought some GOOG late in the day after famous money manager <a href=\"http:\/\/twitter.com\/#!\/dougkass\">Doug Kass tweeted<\/a>: &#8220;picking at google at 489-490 &#8211; first time long time. another long rental.&#8221; I had been watching it periodically and just assumed it would finally stop sliding at $490. When I saw that level fall, I felt compelled to position for an oversold bounce. I am strictly following the trading rules here and putting all emotion aside. Emotionally, I am horrified by the pernicious selling in GOOG and certainly those emotions were telling me not touch this hot potato with a 10-foot pole. <\/p>\n<p><strong>Flowserve (FLS)<\/strong><br \/>\nFlowserve provided a vivid example of why it is better to stick with rules than emotions. FLS represents exactly what I look for in an oversold bounce even as the slide preceding the bounce has warning flags written all over it.<\/p>\n<p>FLS has had an awful June. This industrial company lost 19% for the month at yesterday&#8217;s sickening lows. FLS has lost 26% from its multi-year highs. Yet, today, FLS managed to bounce as much as 5% on a day so many stocks (mostly tech) experienced severe selling pressure.<\/p>\n<p><center><br \/>\n<figure id=\"attachment_5579\" aria-describedby=\"caption-attachment-5579\" style=\"width: 515px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2011\/06\/110617_FLS.jpg\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2011\/06\/110617_FLS.jpg\" alt=\"Flowserve gets a much coveted bounce from oversold conditions\" title=\"Flowserve gets a much coveted bounce from oversold conditions\" width=\"525\" height=\"468\" class=\"size-full wp-image-5579\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2011\/06\/110617_FLS.jpg 525w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2011\/06\/110617_FLS-300x267.jpg 300w\" sizes=\"auto, (max-width: 525px) 100vw, 525px\" \/><\/a><figcaption id=\"caption-attachment-5579\" class=\"wp-caption-text\">Flowserve gets a much coveted bounce from oversold conditions<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>I would not have bought such a stock without the T2108 oversold readings. However, I was so surprised by such a strong move when so many other stocks were performing so poorly, I sold the stock early; a moment where I let my emotions get the best of me. The strong slide leading into today&#8217;s strong counter-trend reaction was constantly playing on my mind. I even bought a put to add a margin of safety for the trade. I should have just held the shares for the full day, especially with that put in hand. I am still holding the put and will use it as part of an overall hedge on a quick return to oversold conditions.<\/p>\n<p><center><br \/>\n<em>Charts below are the <strong>latest<\/strong> snapshots of T2108 (and the S&#038;P 500)<\/em><br \/>\nRefresh browser if the charts are the same as the last T2108 update.<br \/>\n<\/p>\n<p><strong>Daily T2108 vs the S&#038;P 500<\/strong><br \/>\n<img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/www.drduru.com\/money\/charts\/T2108-daily_s.jpg\" width=\"525\" height=\"356\" alt=\"T2108 vs. the S&#038;P 500 (DAILY)\" title=\"T2108 vs. the S&#038;P 500 (DAILY)\"><\/p>\n<p>Black line: T2108 (measured on the right); Red line: S&#038;P 500 (for comparative purposes)<br \/>\n<\/center><\/p>\n<p><center><br \/>\n<strong>Weekly T2108<\/strong><br \/>\n<img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/www.drduru.com\/money\/charts\/T2108-weekly_s.jpg\" width=\"525\" height=\"354\" alt=\"Weekly T2108\" title=\"Weekly T2108\"><br \/>\n*<strong>All charts created using TeleChart:<\/strong> <a href=\"http:\/\/www.worden.com\/CURRENTAFPROMO.aspx?AFCODE=866\"><img decoding=\"async\" src=\"http:\/\/www.worden.com\/Content\/Banners\/images\/88x31.gif\"><\/a><br \/>\n<\/center><\/p>\n<p><strong>Related links:<\/strong><br \/>\n<a href=\"http:\/\/www.drduru.com\/money\/T2108.htm\">The T2108 Resource Page<\/a><br \/>\n<a href=\"http:\/\/www.drduru.com\/money\/charts\/T2108-daily.jpg\">Expanded daily chart of T2108 versus the S&#038;P 500<\/a><br \/>\n<a href=\"http:\/\/www.drduru.com\/money\/charts\/T2108-weekly.jpg\">Expanded weekly chart of T2108 <\/a><\/p>\n<p>Be careful out there!<\/p>\n<p>Full disclosure: long SSO puts, long GOOG call, long FLS put, long AAPL call<\/p>\n","protected":false},"excerpt":{"rendered":"<p>(T2108 measures the percentage of stocks trading above their respective 40-day moving averages [DMAs]. To learn more about it, see my T2108 Resource Page.) T2108 Status: 21% and neutral (ending 2 days of oversold conditions). VIX Status: 22; higher than the start of last oversold period (19). General (Short-term) Trading Call: Hold, assuming trading longs &#8230; <a title=\"T2108 Update &#8211; June 17, 2011\" class=\"read-more\" href=\"https:\/\/drduru.com\/onetwentytwo\/2011\/06\/17\/t2108-update-110617\/\">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":[135,62],"tags":[250,534,596,595,231,230,65,226,1597],"class_list":["post-5574","post","type-post","status-publish","format-standard","hentry","category-stock-market-trading","category-technical-analysis","tag-aapl","tag-apple-inc","tag-flowserve","tag-fls","tag-goog","tag-google","tag-sp-500","tag-t2108","tag-technical-analysis"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>T2108 Update - June 17, 2011 - 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\/06\/17\/t2108-update-110617\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"T2108 Update - June 17, 2011 - ONE-TWENTY TWO: Trading Financial Markets\" \/>\n<meta property=\"og:description\" content=\"(T2108 measures the percentage of stocks trading above their respective 40-day moving averages [DMAs]. To learn more about it, see my T2108 Resource Page.) T2108 Status: 21% and neutral (ending 2 days of oversold conditions). VIX Status: 22; higher than the start of last oversold period (19). General (Short-term) Trading Call: Hold, assuming trading longs ... 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To learn more about it, see my T2108 Resource Page.) T2108 Status: 21% and neutral (ending 2 days of oversold conditions). VIX Status: 22; higher than the start of last oversold period (19). General (Short-term) Trading Call: Hold, assuming trading longs ... 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