(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: 13.2% (drop from 21.1%)
T2107 Status: 16.6%
VIX Status: 27.6 (an increase of 17.0%)
General (Short-term) Trading Call: Bullish (upside target of 1996 on the S&P 500 before overbought conditions finally occur again. See “From the Edge of A Breakout to the Ledge of A Breakdown” for more details).
Active T2108 periods: Day #1 under 20% (first day of oversold period ended just 9 days above 20%), Day #7 under 30%, Day #29 under 40%, Day #89 under 50%, Day #106 under 60%, Day #311 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
Last week's close calls have turned into a prelude.
On Monday, September 28, 2015, the sellers took center stage and full control of the market action. T2108 dropped back into oversold conditions for the third time in a month. This latest plunge defied my expectations for the S&P 500 (SPY) to hold up long enough for retests of resistance at the 50 and 200-day moving averages (DMA).
The S&P 500 follows through on breakdown from wedge of last two oversold periods
T2108 plunges back into oversold territory
The sellers demonstrated their strength by closing the S&P 500 well below the lower-Bollinger Band (BB). As a reminder the lower-BB measures a TWO standard deviation move away from the 20-day moving average. The S&P 500 is now dangerously close to retesting its lows from the flash crash. If this line in the sand melts away then the next stop must surely be the lows from the oversold period of October, 2014: a 1820 target for the S&P 500.
