T2108 Upate – A Deceptively Calm Market Day

T2108 Status: 55.7%
T2107 Status: 31.9%
VIX Status: 15.3
General (Short-term) Trading Call: slightly bearish
Active T2108 periods: Day #27 over 20%, Day #26 over 30%, Day #26 over 40%, Day #24 over 50% (overperiod), Day #1 under 60% (ending 8 days over 60%) (underperiod), Day #341 under 70%

Reference Charts (click for view of last 6 months from Stockcharts.com):
S&P 500 or SPY
SDS (ProShares UltraShort S&P500)
U.S. Dollar Index (volatility index)
EEM (iShares MSCI Emerging Markets)
VIX (volatility index)
VXX (iPath S&P 500 VIX Short-Term Futures ETN)
EWG (iShares MSCI Germany Index Fund)
CAT (Caterpillar).
IBB (iShares Nasdaq Biotechnology).

Commentary
In the last T2108 Update, I continued to make the case that the market’s momentum is waning. I left out an important piece of the story: T2107 – the percentage of stocks trading above their respective 200-day moving averages (DMAs).

The recovery for T2107 stopped cold just short of a complete reversal of the losses from the August Angst

The recovery for T2107 stopped cold just short of a complete reversal of the losses from the August Angst

As the chart above shows, the percentage of stocks trading above their respective 200DMAs has yet to recover all the losses recorded since the August Angst began. This means the downtrend that accelerated starting in May is still in place and still telling us that the underlying breadth of the market’s advance is very poor. As a reminder, T2107 has been in decline ever since its first rapid post-crisis recovery.

To-date, the on-going deterioration in breadth - relative to the critical long-term trend indicator 200DMA - of the market has mattered little

To-date, the on-going deterioration in breadth – relative to the critical long-term trend indicator 200DMA – of the market has mattered little

T2108 closed at 55.7% after recovering from early losses. For a brief moment it looked like the bearish breakdown was underway. The S&P 500 similarly held up and marked a second day honoring its 200DMA support. Note how that support has now converged with an uptrending 20DMA.

The S&P 500 (SPY) prints a small rebound above 200DMA support

The S&P 500 (SPY) prints a small rebound above 200DMA support

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Full disclosure: long AAPL put spread, short shares, long call options

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Comments

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Jim Bomprezzi 6 years ago Member's comment

Hey, what can I say. This is great. Effort appreciated.

Dr. Duru 6 years ago Author's comment

Well, thanks for reading!