T2108 Status: 23.7%
T2107 Status: 45.1% (exactly matches 7 1/2 month closing low set on Friday)
VIX Status: 15.98
General (Short-term) Trading Call: Hold (TRADERS REMAIN READY FOR WIDE SWINGS)
Active T2108 periods: Day #318 over 20% (includes day #280 at 20.03%, day #318 low at 20.25%), Day #5 under 30% (underperiod), Day #11 under 40%, Day #13 under 50%, Day #15 under 60%, Day #57 under 70%
Commentary
So yesterday delivered the gap down I was looking for on Friday. Still, T2108 did not quite reach oversold territory. It got as low as a tantalizing 20.03%.
Close enough? Tantalizingly close to oversold before bouncing
T2107 also dipped. Unlike T2108, its intraday recovery only took it back to last Thursday’s close.
T2107 bounces but remains at a major low for the year
The question now of course is whether this drop was “close enough” to triggering oversold conditions. The move off the bottom was too quick for me to react intraday. Moreover, I prefer a CLOSE in oversold conditions before lining up my trades on oversold conditions. To add to my hesitancy, the major indices, the S&P 500 (via SPDR S&P 500 (ARCA:SPY)) and the NASDAQ (via PowerShares QQQ (NASDAQ:QQQ)), are struggling at their 50-day moving averages (DMAs).
The S&P 500 bounces right back to the 50DMA after gapping down
Note that the S&P 500 does not show the proper open. SPY shows the gap down.
The NASDAQ struggles to hold onto 50DMA support
Finally, on the positive side, the VIX, the volatility index, gapped up and then failed to beat the high from August 1st that marked the peak of the last sell-off.
The VIX fades right at resistance but remains above 15.35 pivot
So, on balance, the trading call remains on HOLD yet again. IF the indices manage a solid close above the 50DMA -meaning a close above Thursday’s high as well – I will feel comfortable assuming that oversold conditions are behind us. Ironically, I will feel even MORE comfortable initiating buys if the S&P 500 generates some more palpable fear with a large spike in the VIX, a T2108 below 18% (the low from the last sell-off), and even an S&P 500 that cracks September’s low. Stay tuned!
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%)
Be careful out there!
Disclosure: net short the Australian dollar