(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: 65.1%
T2107 Status: 65.2%
VIX Status: 13.2
General (Short-term) Trading Call: neutral
Active T2108 periods: Day #102 over 20%, Day #8 over 30%, Day #7 over 40%, Day #6 over 50%, Day #1 over 60%, Day #20 under 70%
Commentary
The S&P 500 (SPY) broke out to a new 2016 high that is also, amazingly, within a hair's length of a fresh all-time high.
The S&P 500 makes a convincing breakout that confirms support at the 50DMA.
The last all-time high was set on May 21, 2015 (I have mistakenly given May 15th as the date in some earlier posts) with the S&P 500 at 2130.82. At the time, the index was laboring mightily making a series of sporadic new marginal all-time highs. T2108, the percentage of stocks trading above their 40-day moving averages (DMAs) closed that day at a paltry and unconvincing 53.3%. While the S&P 500 was struggling to gather more momentum, T2108 was also stuck and failing to confirm the bullishness that typically accompanies new all-time highs. The index went on to confirm the top and has had a series of wild gyrations up and down since then.
Today, T2108 is much stronger at 65.1%. Yet, a switch to a bullish short-term trading call must wait for T2108 to push back into overbought territory. Such a move provides more evidence that buyers may have sustaining power at these lofty levels. Right now, T2108 is still facing a downtrend from the last highs. T2107, the percentage of stocks trading above their respective 200DMAs, has yet to regain its bullish breakout from the post-recession downtrend (the thick black line cutting across the top of the chart).
T2108 is rallying in an attempt to break a pattern of lower highs.
T2107 is rallying in an attempt to resume its previous bullish breakout.
Recall that T2108's fall from overbought conditions was a key bearish signal on June 10th. The S&P 500 invalidated that bearish signal when it closed above its 50DMA as part of a sharp, post-Brexit reversal and recovery. I switched to neutral at that point awaiting the catalyst for a bullish trading signal. If T2108 once again fails to break resistance at the threshold of overbought conditions, I will flag an even more bearish warning than the last time.
