T2108 Update – The S&P 500 On A Slippery Slope

T2108 Status: 73.8%
T2107 Status: 45.4%
VIX Status: 16.3
General (Short-term) Trading Call: neutral
Active T2108 periods: Day #41 over 20%, Day #40 over 30%, Day #37 over 40%, Day #34 over 50%, Day #30 over 60%, Day #29 over 70% (overbought)

Commentary
The latest Fed play that I described in the last T2108 Update worked out pretty well. The market once again reacted with post-Fed soothing after CNN’s Fareed Zakaria hosted a discussion with the four living chairs of the U.S. Federal Reserve. ProShares Short VIX Short-Term Futures (SVXY) gapped up, and I sold (a bit too soon granted). However, that trading action is already old news. Since that small gap up, the S&P 500 (SPY) has logged two weak closes in a row. The index is starting to look like it is building a slippery slope with the past 7 trading days or so forming a small downtrend through the 20-day moving average (DMA).

The S&P 500 (SPY) is showing a slight negative bias although support lingers directly below from the 50 and 200-day moving averages (DMAs)

 

The S&P 500 (SPY) is showing a slight negative bias although support lingers directly below from the 50 and 200-day moving averages (DMAs)

T2108, the percentage of stocks trading above their respective 40-day moving averages (DMAs), closed at 73.8% as it tenuously holds onto overbought status. This is now day #29 of the overbought period, and the S&P 500 is starting to lag expected performance. The S&P 500 is up 3.2% for the overbought period. If the overbought period ended today, projections suggest around a 4-5% gain. To align with historical performance, the S&P 500 will either need to end right away, or resume in earnest its extended overbought rally.

S&P 500 Performance By T2108 Duration Above the 70% Threshold

 

S&P 500 Performance By T2108 Duration Above the 70% Threshold

While T2108 is slipping, T2107, the percentage of stocks trading above their respective 200DMAs, remains strong. At 45.4%, T2107 has managed marginal gains the past two days and is still just below recent highs. So while some of the fastest moving stocks are losing altitude, the longer-term underpinnings of the stock market remain strong for now.

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Full disclosure: short AUD/JPY, short GWPH, long GWPH calls, long FXCM, long X call options, long IBB call options, short FB

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