(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 sometimes posted on twitter using the #120trade hashtag. T2107 measures the percentage of stocks trading above their respective 200DMAs)
T2108 Status: 50.0% (closed right at the 50DMA)
T2107 Status: 47.6%
VIX Status: 16.5 (resting right on its 50DMA)
General (Short-term) Trading Call: “Full bull” mode: buy dips, expect rips, and minimize shorts
Active T2108 periods: Day #44 over 20%, Day #3 above 30%, Day #2 over 40% (ended 4 days under 40%), Day #8 under 50%, Day #12 under 60%, Day #114 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).
Commentary
Bulls could not ask for a better end to trading last week. T2108 closed at 50% after trading as low as 26%. The S&P 500 (SPY) made a sharp reversal from a (false) 50DMA breakdown. This move was so strong that at one point, the index was flirting with a fresh all-time high!
The S&P 500 ends the week on the tail-end of a dramatic turn-around from a 50DMA breakdown
The rally on Thursday was so strong that I actually managed to flip a double on ProShares Ultra S&P500 (SSO) call options on the same day. Following the strategy I outlined in the last T2108 Update, I assumed that Thursday's strong open validated Wednesday's 50DMA breakout. I immediately loaded up on call options and also set a limit order for more in case the market delivered a pullback. Instead, the market never looked back and left me of course wishing I had been bold enough to buy my entire Christmas wishlist right from the beginning!
