{"id":7123,"date":"2011-09-04T21:37:11","date_gmt":"2011-09-05T01:37:11","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=7123"},"modified":"2011-09-04T23:46:47","modified_gmt":"2011-09-05T03:46:47","slug":"t2108-update-110902","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2011\/09\/04\/t2108-update-110902\/","title":{"rendered":"T2108 Update – September 2, 2011 (Setback)"},"content":{"rendered":"

(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<\/a>. You can follow real-time T2108 commentary<\/a> on twitter using the #T2108 hashtag.)<\/p>\n

T2108 Status<\/strong>: 24%
\nVIX Status<\/strong>: 34
\nGeneral (Short-term) Trading Call<\/strong>: Start closing out bearish positions. Otherwise hold. (See below for more details.)<\/p>\n

Commentary<\/strong><\/p>\n

Thursday’s technical resilience in the face of overbought stochastics<\/a> and a VIX poised for a bounce melted away on Friday in trading action that represents a definite setback to the rally from August lows. The S&P 500 dropped 2.5%<\/a> and ended the day right at its last close before T2108 finally broke out of oversold territory<\/a>. T2108 closed at 24% and managed to avoid dropping back into oversold territory – a minor victory with tenuous support.<\/p>\n

If T2108 drops back into oversold territory, I will reinstate all the rules from the oversold period T2108 just exited. The 2011 low will come into focus again; it will become the obvious target for support and the line where market manipulators, uh, makers will attempt to take out stops. As a reminder, I posted the rules for dealing with the lows in the August 19th T2108 Update<\/a>. For a complete review of the rules for trading an oversold market, see my August 5th T2108 Update<\/a>.<\/p>\n

I sold my position in SDS<\/a> in the middle of Friday’s selling. I also closed out several other bearish positions that I had opened as some insurance in the face of the ominous overbought stochastics. If T2108 closes in oversold territory, I will dump all but my “in case of market crash” bearish positions. In other words, until further notice, I think at a bare minimum traders should hold some out of the money puts in stocks with high valuations (especially high-technology stocks). As a reminder, my two main choices are Amazon.com (AMZN) and LinkedIn (LNKD). I also bought FXF, the Rydex CurrencyShares Swiss Franc ETF. With the Swiss National Bank abruptly backing off its latest aggressive efforts to devalue the franc<\/a>, traders are “free” once again to pile into the franc. I am expecting another (near) parabolic move in the currency if market sentiment sinks again into abject fear (see trading in early August for an example<\/a>). Regardless, the upward trend in the franc remains well intact.<\/p>\n

To date, I have only posted trades on twitter<\/a> that I think are most directly relevant to the T2108 trading strategy or some other blog post in which I have discussed trading a particular stock. I do not know how many people have found these posts useful, but if I hear interest in other trades, I will try my best to post those as well.<\/p>\n

Finally, note that the S&P 500 is now down 6.7% for the year. Odds are high that the index will close the year in negative territory based on a high correlation between year-to-date performance on the day before the Labor Day holiday and year-end performance (see “2007 Update for Post-Labor Day Analysis<\/a>“).<\/p>\n


\nCharts below are the latest<\/strong> snapshots of T2108 (and the S&P 500)<\/em>
\nRefresh browser if the charts are the same as the last T2108 update.
\n<\/p>\n

Daily T2108 vs the S&P 500<\/strong>
\n\"T2108<\/p>\n

Black line: T2108 (measured on the right); Red line: S&P 500 (for comparative purposes)
\n<\/center><\/p>\n


\nWeekly T2108<\/strong>
\n\"Weekly
\n*All charts created using TeleChart:<\/strong> <\/a>
\n<\/center><\/p>\n

Related links:<\/strong>
\nThe T2108 Resource Page<\/a>
\nExpanded daily chart of T2108 versus the S&P 500<\/a>
\nExpanded weekly chart of T2108 <\/a><\/p>\n

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

Full disclosure: long shares and calls on SSO, long VXX puts, long FXF, long AMZN and LNKD puts<\/p>\n","protected":false},"excerpt":{"rendered":"

(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. You can follow real-time T2108 commentary on twitter using the #T2108 hashtag.) T2108 Status: 24% VIX Status: 34 General (Short-term) Trading Call: Start closing out bearish positions. Otherwise hold. (See below … 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":[397,398,459,629,579,715,65,656,333,226,1597],"class_list":["post-7123","post","type-post","status-publish","format-standard","hentry","category-stock-market-trading","category-technical-analysis","tag-amazon","tag-amzn","tag-fxf","tag-linkedin-corporation","tag-lnkd","tag-rydex-currencyshares-swiss-franc-trust-etf","tag-sp-500","tag-sds","tag-swiss-franc","tag-t2108","tag-technical-analysis"],"yoast_head":"\nT2108 Update - September 2, 2011 (Setback) - 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\/09\/04\/t2108-update-110902\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"T2108 Update - September 2, 2011 (Setback) - 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]. 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