T2108 Status: 31.0%
T2107 Status: 16.6%
VIX Status: 24.1
General (Short-term) Trading Call: bullish
Active T2108 periods: Day #2 over 20%, Day #1 over 30% (ends 6 days under 30% – corrected earlier data) (overperiod), Day #46 under 40%, Day #50 below 50%, Day #65 under 60%, Day #406 under 70%
Commentary
Market sentiment made another step in the right direction today. With T2108 closing at 31.0%, the market printed strong follow-through to Friday’s impressive bounce from oversold conditions. T2108 ended 6 days trading below 30%. This duration is around the mean amount of time for a trip below 30%. However, the chart below shows that the 46 days below 40% is an extremely long time. This is still a market under pressure.
Mean and Median Duration Below Given T2108 Threshold
The S&P 500 (N:SPY) gained a healthy 1.7% on the day. This is the second day in a row of gains. As the chart below shows, the index has not been able to string THREE days in a row of gains since the last gasps of the Santa Claus rally in late December. Yet one more way to appreciate the kind of selling pressure that has dominated the action in 2016.
The S&P 500 follows through on a sharp rebound off oversold conditions.
Tuesday’s move confirms once again overhead resistance for the VIX, but the trend remains up thanks to both the 20 and 50DMAs.
The volatility index, the VIX, fails to break resistance at its 2012 intraday high yet again.
Given the uptrend and the heavy selling pressure for almost two months, I am VERY surprised that the VIX has remained relatively well-contained. That selling pressure included THREE oversold periods, one of which took T2108 all the way to low single digits just last month. Something does not “add up” here. Either there is some kind of bullish divergence occurring between the relatively tame VIX and the long-suffering S&P 500 or there is some kind of pressure building for a future volatility surge. Traders certainly cannot get comfortable under these circumstances.
If the Australian dollar versus the Japanese yen (AUD/JPY) maintains the current overnight sell-off at the time of writing, the S&P 500 is looking at ending another winning streak at two days.
The Australian dollar versus the Japanese yen (AUD/JPY) has taken a steep dive in overnight trading. It looks ready to resume its sell-off and thus take stock markets with it.
I used the day’s rally to pick some last hedges against bullishness. I am now going to sit tight from here and see what happens.
One of my more intriguing longs is probably Coach Inc (N:COH). I missed the neat bounce off 50DMA support on Friday, but I jumped in right at the open.
Coach (COH) appears to be on an extended recovery. The bullish 200DDMA breakout from January has apparently and neatly survived its first test.
Given JP Morgan Chase (N:JPM) helped to mark the latest bottom, I am now watching the stock closely. As I suspected in the last T2108 Update, Friday’s gap up that created a bullish abandoned baby bottom likely drained a lot of energy from buyers for now. JPM still faces stiff resistance at recent highs and then the 50DMA after that.
JP Morgan Chase (JPM) has made a definitively bullish bottom, but it may be stuck in the recent churn for some time consolidating bullish energy.
Finally, in the last T2108 Update I promised something on gold and silver. I got gold covered here: “Market Sentiment Marks A Fresh Bottom For Gold.” One of the comments on that piece made me look into the gold/oil ratio. One word: WOW. An all-time high! Something has to give…
The gold versus oil ratio is at an all-time high!!!
Source: Ice Benchmark Administration, Gold Fixing Price 10:30 A.M. (London time) in London Bullion Market, based in U.S. Dollars [GOLDAMGBD228NLBM], retrieved from FRED, Federal Reserve Bank of St. Louis, February 17, 2016.
US. Energy Information Administration, Crude Oil Prices: West Texas Intermediate (WTI) – Cushing, Oklahoma [DCOILWTICO], retrieved from FRED, Federal Reserve Bank of St. Louis, February 17, 2016.
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
Be careful out there!
Full disclosure: long SSO call options, long SSO shares, long SVXY shares, long UVXY puts, short AUD/JPY, long GLD, long COH call options, short USO calls and put options, long USO call options