T2108 Status: 59.9%
T2107 Status: 27.8%
VIX Status: 17.7 (small bounce off 200DMA)
General (Short-term) Trading Call: Neutral (target of 1996 on the S&P 500 occurred ahead of overbought conditions.
Active T2108 periods: Day #8 over 20%, Day #7 over 30%, Day #7 over 40%, Day #5 over 50% (overperiod), Day #1 under 60% (ending 3 days over 60%), Day #322 under 70%
Commentary
322 trading days and counting since T2108 last traded in overbought conditions. I thought THIS would be the week for finally bringing the streak to an end, but T2108 took a sharp detour yesterday.
Like a forcefield, overbought conditions once again defy a breakthrough by T2108
In parallel, the S&P 500 (SPDR S&P 500 (N:SPY)) lost a fraction of a percent as the index turned its back on the recent 50DMA breakout.
The S&P 500 (SPY) may have stalled out for now
The small loss on the day helped the volatility index, the VIX, finally end its 10-day losing streak. The VIX jumped 9.3% yesterday with a bounce off its 200DMA.
The angst of August has become a distant memory. The drama with Glencore (L:GLEN) helped spark a very brief revival of angst.
The big rally in the Australian dollar came to a screeching halt. As I have indicated before, I am VERY skeptical about the sustainability of this rally.
The Australian dollar printed a higher low against the Japanese yen as Glencore collapsed on September 29, 2015
Earnings season has begun so, as always during this time, I am staying away from overplaying my hand with the technical calls. However, I think it is very surprising that the volatility index declined so steadily going into earnings season. This decline sets up the potential for some very disruptive moves if any major company delivers particularly bad news. So with T2108 scraping at overbought levels, a volatility index hovering above the 15.35 pivot, and a market taking a suddenly calm outlook on earnings, I am definitely avoiding any major bullish bets. (Trading call is still neutral).
On a related noted, I have pumped the brakes on the trade on iShares Nasdaq Biotechnology (O:IBB). I have written several pieces on this trade, ever since Presidential candidate Hillary Clinton bashed the sector. The rally off the bottom has definitely stalled and could even be poised to make at least one more lower low. I think at this point, it makes sense to wait to see whether IBB can generate another big swoosh of selling and/or a retest of the big low last month on high selling volume. Note well that a breakout from the current consolidation might run IBB right into declining 50DMA resistance. My upside target remains a complete reversal of the post-Clinton selling.
iShares Nasdaq Biotechnology (IBB) ran into effective resistance at its downtrending 20DMA even as a trading range extends from September’s washout selling.
Speaking of the health care sector, Intuitive Surgical (O:ISRG) has my attention again as the stock briefly cracked 52-week lows. The stock is on the edge of a major breakdown ahead of earnings next week on October 20th. I am always biased on ISRG to look for a buying opportunity, but the current trading action looks very bearish.
Intuitive Surgical (ISRG) flirts with a fresh breakdown as it trades well below flash crash levels and levels from the last three earnings reports
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
Full disclosure: long SVXY shares, short AUD/JPY, net long U.S. dollar, long GLD