{"id":8589,"date":"2011-12-06T03:44:17","date_gmt":"2011-12-06T08:44:17","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=8589"},"modified":"2011-12-06T06:20:41","modified_gmt":"2011-12-06T11:20:41","slug":"t2108-update-111205","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2011\/12\/06\/t2108-update-111205\/","title":{"rendered":"T2108 Update &#8211; December 5, 2011 (Almost Overbought)"},"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>. You can <a href=\"http:\/\/twitter.com\/#!\/search\/%23T2108\">follow real-time T2108 commentary<\/a> on twitter using the #T2108 hashtag. T2108-related trades and other trades are posted on twitter using the #120trade hashtag)<\/p>\n<p><strong>T2108 Status<\/strong>: 68%<br \/>\n<strong>VIX Status<\/strong>: 28<br \/>\n<strong>General (Short-term) Trading Call<\/strong>: Start building a bearish position. If holding bullish trading positions, close at least one. Otherwise hold.<\/p>\n<p><strong>Commentary<\/strong><br \/>\nIt was another day of <a href=\"http:\/\/drduru.com\/onetwentytwo\/2011\/12\/04\/t2108-update-111202\/\" title=\"T2108 Update \u2013 December 2, 2011 (Europhoria \u2013 without the euro)\" target=\"_blank\">europhoria without the euro<\/a>. Once again, I found myself tweeting about the unconvincing nature of another small upward pop in the euro. This time, I was soon validated by a large plunge in the euro which brought the currency right back to Friday&#8217;s lows against the U.S. dollar. At the time of writing, the euro continues to dribble downward.<\/p>\n<p>I use 30-minute bars in the chart below to highlight the dramatic change in fortune for the euro on an intraday basis. <\/p>\n<p><center><br \/>\n<figure id=\"attachment_8590\" aria-describedby=\"caption-attachment-8590\" style=\"width: 490px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2011\/12\/111205_EURUSD.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2011\/12\/111205_EURUSD.png\" alt=\"The euro continues to look fragile\" title=\"The euro continues to look fragile\" width=\"500\" height=\"350\" class=\"size-full wp-image-8590\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2011\/12\/111205_EURUSD.png 500w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2011\/12\/111205_EURUSD-300x210.png 300w\" sizes=\"auto, (max-width: 500px) 100vw, 500px\" \/><\/a><figcaption id=\"caption-attachment-8590\" class=\"wp-caption-text\">The euro continues to look fragile<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>The stock market has been surprisingly, even amazingly resilient, in the face of a wobbly euro. (I find it particularly amusing to see headlines attributing stock market strength to &#8220;positive&#8221; developments in the eurozone even as the euro&#8217;s attempts to rally continue to get faded). <a href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=$SPX&#038;p=D&#038;st=2011-07-05&#038;en=2011-12-05&#038;id=p15880085697\" title=\"5-mont chart of the S&#038;P 500\" target=\"_blank\">The S&#038;P 500<\/a> has now knocked on overhead resistance for a third day in a row. Under different circumstances I would insist this behavior indicates a stubborn bullishness in the market; I would insist that the stock market is wearing down resistance. However, T2108 is now at 68% and almost overbought. <a href=\"http:\/\/stockcharts.com\/h-sc\/ui?s=$VIX&#038;p=D&#038;st=2011-07-05&#038;en=2011-12-05&#038;id=p15880085697\" title=\"5-month chart of the VIX\" target=\"_blank\">The VIX<\/a> is now on its fourth day below 30 &#8211; something that has not happened since the August swoon &#8211; with its 200DMA holding firm. Even if the S&#038;P 500 manages to overcome resistance, the upside potential for the market seems very limited and not worth the risk. Granted, December tends to be a mild trading environment, especially with so many hoping for a &#8220;Santa Claus&#8221; rally. But I would prefer to prepare for a January fade whose virulence will be matched by the amount of complacency shown this month.<\/p>\n<p>The upshot of all this is that IF the euro finally does surge with follow-through (and the U.S. dollar index finally drops out of its upward trending channel), the accompanying rally in stock markets could be very substantial. Overbought would simply get even more overbought, and I will return to counting down the days and comparing the period to historic periods of stubborn overbought conditions. This means that, for now, I cannot get aggressive with bearish positions even though 2011 is full of sharp sell-offs to end overbought periods. The last sell-off was another great example of this behavior. At the time, I stated I had learned my lesson to get more aggressive on the next overbought round. My large caveat (and clarification) is my preference to wait for overbought conditions to get very mature and extended before getting aggressive.<\/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<a href=\"http:\/\/www.drduru.com\/money\/charts\/T2108-daily_s.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/www.drduru.com\/money\/charts\/T2108-daily_s.png\" width=\"500\" height=\"350\" alt=\"T2108 vs. the S&#038;P 500 (DAILY)\" title=\"T2108 vs. the S&#038;P 500 (DAILY)\"><\/a><\/p>\n<p>Black line: T2108 (measured on the right); Green line: S&#038;P 500 (for comparative purposes)<br \/>\n<\/center><\/p>\n<p><center><br \/>\n<strong>Weekly T2108<\/strong><br \/>\n<a href=\"http:\/\/www.drduru.com\/money\/charts\/T2108-weekly_s.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/www.drduru.com\/money\/charts\/T2108-weekly_s.png\" width=\"500\" height=\"350\" alt=\"Weekly T2108\" title=\"Weekly T2108\"><br \/>\n*<strong>All charts created using <a href=\"http:\/\/www.freestockcharts.com\/\" title=\"Freestockcharts.com\" target=\"_blank\">freestockcharts.com<\/a><\/strong> unless otherwise stated<\/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 SDS, VXX calls, net long U.S. dollar, net short euro<\/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. You can follow real-time T2108 commentary on twitter using the #T2108 hashtag. T2108-related trades and other trades are posted on twitter using the #120trade hashtag) T2108 Status: 68% VIX Status: 28 &#8230; <a title=\"T2108 Update &#8211; December 5, 2011 (Almost Overbought)\" class=\"read-more\" href=\"https:\/\/drduru.com\/onetwentytwo\/2011\/12\/06\/t2108-update-111205\/\">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":[20,135,62,21],"tags":[376,28,447,479,65,226,1597,303,178,120],"class_list":["post-8589","post","type-post","status-publish","format-standard","hentry","category-forex","category-stock-market-trading","category-technical-analysis","category-u-s-dollar","tag-eurusd","tag-euro","tag-fxe","tag-rydex-currencyshares-euro-trust","tag-sp-500","tag-t2108","tag-technical-analysis","tag-vix","tag-volatility","tag-vxx"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>T2108 Update - December 5, 2011 (Almost Overbought) - 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\/12\/06\/t2108-update-111205\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"T2108 Update - December 5, 2011 (Almost Overbought) - 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. You can follow real-time T2108 commentary on twitter using the #T2108 hashtag. T2108-related trades and other trades are posted on twitter using the #120trade hashtag) T2108 Status: 68% VIX Status: 28 ... 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