T2108 Update (September 3, 2015) – Stock Market Trades To The Edge
Dr. Duru | Sep 04, 2015 04:20AM ET
(T2108 measures the percentage of stocks trading above their respective 40-day moving averages [DMAs]. It helps to identify extremes in market sentiment that are likely to reverse. To learn more about it, see my the #120trade hashtag . T2107 measures the percentage of stocks trading above their respective 200DMAs)
T2108 Status: 16.7% (intraday high of 19.99% – seriosuly!)
T2107 Status: 21.8%
VIX Status: 25.6
General (Short-term) Trading Call: Bullish
Active T2108 periods: Day #10 below 20% (oversold), Day #11 under 30%, Day #34 under 40%, Day #74 under 50%, Day #91 under 60%, Day #289 under 70%
Commentary
The upcoming and much-anticipated U.S. jobs report could completely alter the technical landscape, so I am keeping this T2108 Update short and sweet. (I know – finally!).
T2108 closed at 16.7% for a 10th straight day in oversold territory. Of 66 oversold periods since 1986, only 11 (17%) have lasted longer.
Given this stretch of time, it is only natural that T2108 continues to make moves to breakout and end the oversold period. Today, T2108 traded as high as 19.99% which is .01 percentage point away rom the oversold threshold – I just cannot make this stuff up.
T2108 knocks on the exit gate of a historic oversold period
T2107, the percentage of stocks trading above their 200-day moving averages (DMAs), also rose right to an important exit gate: a higher high that could have started an uptrend from recent lows.
T2107 ALMOST punches out a higher high that could have confirmed the choppy rise from recent lows.
At least the volatility index, the VIX, followed through on the topping action I pointed out in The volatility index, the VIX, is now notably losing momentum as two topping patterns have received confirmation.
Note that the VIX remains elevated, so traders should continue to expect choppy markets. I am still expecting the VIX to remain elevated, say above 20, going into the Federal Reserve’s rate decision on September 17.
Finally, the United States Oil Fund (USO) made another attempt to break from resistance defined by the downward sloping 50DMA. Another decline in its volatility measure, the CBOE Crude Oil Volatility Index (OVX), increases the odds that the breakout will happen soon. My question: are higher oil prices good or bad for a fragile global economy…?
The United States Oil Fund (USO) attempts to break out from its downtrend now defined by the 50DMA
Get The News You Want
Given elevated volatility and lots of hand-wringing over what the Fed will do this month, I expect a major battle of interpretations in the wake of the U.S. jobs report…no matter what the numbers say. I fully expect Friday’s post-jobs trading to represent a microcosm of the larger day-to-day chop of this oversold period. With a long weekend ahead, those with short-term profits will likely look to lock those in. Those who continue to fear what the future holds will likely look to bail at an opportune time to stay “safe” over the extended time away from the market.
Daily T2108 vs the S&P 500
Black line: T2108 (measured on the right); Green line: S&P 500 (for comparative purposes)
Red line: T2108 Overbought (70%); Blue line: T2108 Oversold (20%)
Weekly T2108
Full disclosure: long SVXY shares, long SSO shares and call options, short USO call spread, short USO put options
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