{"id":9201,"date":"2012-01-07T15:13:10","date_gmt":"2012-01-07T20:13:10","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=9201"},"modified":"2012-01-07T15:54:42","modified_gmt":"2012-01-07T20:54:42","slug":"t2108-update-120106","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2012\/01\/07\/t2108-update-120106\/","title":{"rendered":"T2108 Update – January 6, 2012 (Borderline Overbought)"},"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. T2108-related trades and other trades are posted on twitter using the #120trade hashtag)<\/p>\n

T2108 Status<\/strong>: 70% (overbought day #4)
\nVIX Status<\/strong>: 20.6
\nGeneral (Short-term) Trading Call<\/strong>: Close more bullish positions, begin\/expand bearish positions<\/p>\n

Reference Charts<\/strong> (click for view of last 6 months from Stockcharts.com):
\nS&P 500<\/a> or SPY<\/a>
\nSDS<\/a> (ProShares UltraShort S&P500)
\nVIX<\/a> (volatility index)
\nVXX<\/a> (iPath S&P 500 VIX Short-Term Futures ETN)
\nEWG<\/a> (iShares MSCI Germany Index Fund)<\/p>\n

Commentary<\/strong>
\nT2108 closed the day STILL clinging to overbought territory (I rounded up from 69.88%). Since T2108 closed overbought to start the year, the S&P 500 has gone absolutely nowhere. The market’s confusion is perhaps reflected in two key sentiment indicators. Only 17% of investors in the AAII sentiment survey are bearish<\/a> (49% are bullish). However, according to Lipper FMI, investors took money of equity mutual funds for a ninth straight week<\/a> (bonds were again the big beneficiaries). Even the CBOE put\/call equity ratio<\/a> is of no help: over the last month the 21DMA has gone nowhere. The U.S. stock market is even ignoring the continuing plunge in the euro (see “Potential Trades on Euro Fatigue<\/a>” for more details, including my change in trading strategy based on this apparent decoupling).<\/p>\n


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\"AAII<\/a>
AAII Survey Bearish Sentiment<\/figcaption><\/figure>
\n<\/center>
\n<\/p>\n

In the meantime, the VIX continues to sag. The volatility index is now back at its lowest level since the August swoon began. VXX has broken down to fresh 5-month lows, compelling me to buy VXX puts in anticipation of further declines. If the VIX also breaks down, it could signal the needed tie-breaker; advantage would go to the buyers. The T2108 portfolio remains positioned bearishly with powder left to expand the position further if the overbought period extends past the average duration of 9 days (median is 4 days).<\/p>\n

Here are an interesting mix of behaviors in notable individual stocks for the first week of trading:<\/p>\n