T2108 Update – A Second Epic Oversold Period Over The Past Five Months

(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 T2108 Resource Page. You can follow real-time T2108 commentary on twitter using the #T2108 hashtag. T2108-related trades and other trades are occasionally posted on twitter using the #120trade hashtag. T2107 measures the percentage of stocks trading above their respective 200DMAs)

T2108 Status: 7.4% (as low as 3.8%!!! A 7+ year low! Only 27 trading days since 1986 have closed lower than 3.8%).
T2107 Status: 12.1% (a fresh near 7-year closing low. Was as low as 9.0%, a level last seen March, 2009)
VIX Status: 27.6 (faded from a high of the day at 32.1 to close right on the 2012 intraday high)
General (Short-term) Trading Call: bullish
Active T2108 periods: Day #9 under 20%, Day #12 under 30%, Day #28 under 40%, Day #32 below 50%, Day #47 under 60%, Day #388 under 70%

Commentary

At the time I posted this exclamation, I thought the market HAD to be near a bottom for the day. I could not see how this freefall could continue without a corresponding extreme move in the Japanese yen (FXY). Earlier in the day I observed a yen that looked very reluctant to continue to agree with the market’s panic…

As it turned out, T2108 and the S&P 500 (SPY) did manage to drop even lower before staging a massive comeback. T2108 bounced back from a low of 3.8% to close at 7.4%. The low was a 7+ year low. Only 27 trading days since 1986 have closed lower than 3.8%; all these days were associated with the 1987 crash and the 2008 half of the financial crisis. T2107, the percentage of stocks trading above their respective 200DMAs, traded as low as 9.0% before closing at 12.1%. March, 2009 was the last time T2107 dropped as low as it did today. T2107 closed at a fresh 7-year low. Amid the carnage, the S&P 500 dropped as low as 1812 for a whopping 4.0% loss. This intraday low was last seen in April, 2014, almost two years ago. The index closed just under the lows of the August Angst of 2015 and a fresh 15-month low.

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Disclosure: Long SVXY shares, long and short UVXY put options, long SSO call options, long SSO shares, long IBB call ...

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