T2108 Status: 63.3%
VIX Status: 12.0%
General (Short-term) Trading Call: Hold (Bullish)
Active T2108 periods: Day #299 over 20% (includes day #280 at 20.01%), Day #13 over 40%, Day #11 over 50% (overperiod), Day #38 under 60%, Day #39 under 70%
Commentary
Another day, another all-time high…and a fresh run-up is in sight. In the chart below, notice all the “white space” sitting between the current close at 2003 and the upper-Bollinger Bands®.
The S&P 500 could be in the early part of a developing uptrending channel
The seasonal weakness never materialized for August in the form of an out-sized drawdown despite the big drop that preceded the month. Instead of a large drawdown, August’s 3.8% gain was its best performance since the year 2000. In 2000, the S&P 500 gained 6.1% in August; the S&P 500 gained 3.4% in August, 2009. Before 2014, August was DOWN three of the last four years. On the flip side, four out of the last five years have delivered UP performances for September. Here is a chart relating August to September performances since 1950.
August vs September Price Changes for the S&P 500: 1950 to 2013
Source for prices: Yahoo! Finance
Notice that there is no apparent pattern or relationship between the performances of the two months. There are some related raw stats of interest from 1950 to 2013 for August and September:
- 35, or 55%, of years August closed with a gain.
- 14, or 40%, of the years with an up August delivered an up September.
- 29, or 45%, of years September closed with a gain.
Given the odds seem to favor a down month for September, I will be very inclined to switch bearish if T2108 hits overbought levels (70% or above). At the current pace, T2108 should hit overbought by the middle of September.
Click image for a larger view…
T2108 is closing in on overbought territory after another sharp rebound from (quasi)oversold conditions
The NASDAQ (PowerShares QQQ (NASDAQ:QQQ)) looks even more bullish than the S&P 500. The tech-laden index bounced liked a springboard off the first Bollinger Band at the lows of the day and closed for a marginal new 14-year high. Unlike the S&P 500, the NASDAQ is already clearly driving higher in an upward channel between the first and second Bollinger Bands. The Bands are wide open for a continuation of the rally.
The NASDAQ jumps like a springboard to continue a push in an uptrending channel
Interestingly, the volatility index, the VIX, avoided making fresh lows. There is no bearish divergence here, just something to watch for now. The VIX could easily plunge if it becomes clear to market participants that the market is going to soar a lot higher.
Volatility has managed to avoid fresh lows despite the stock market’s upward push
I end with a fascinating chart a la Twitter (NYSE:TWTR). The stock is right back at the critical $50 level. Twitter is one of those special cases where analysts stepped up to upgrade the stock right in the middle of what looked like the beginning of the end. Given the general negative sentiment on Twitter, I identified these upgrades as potential markers for a bottom. They were.
Click image for a larger view…
Twitter faces a critical test at $50
The chart above shows some of the key fundamental and technical milestones for Twitter. If you look very closely, you will see TWTR is trading above a newly formed 200-day moving average (DMA) – a very bullish event. So, I daresay, TWTR will cleave through, likely gap up, over the $50 hurdle. Shorts have already been scrambling to get out of the way of this run-up. Only 4.2% of the float is now short TWTR…
Shorts are tweeting a stampede to get out of the way of rising momentum
Daily T2108 vs the S&P 500
Black line: T2108 (measured on the right); Green line: S&P 500 (for comparative purposes)
Red line: T2108 Overbought (70%); Blue line: T2108 Oversold (20%)
Weekly T2108
