: 65.9%
VIX Status: 15.4
General (Short-term) Trading Call: Hold
Commentary
The S&P 500 closed just under the wedge I pointed out in the last T2108 Update.
At this point, I would normally assume an upside breakout to a wedge formation. However, T2108 actually DECLINED yesterday, from 67.9% to 65.9%. This is not a huge difference but it was nonetheless surprising given the S&P 500 managed a marginal gain that took it to the upper limits of the wedge. This bearish divergance suggests that the more likely path is back down to the bottom of the wedge.
The huge caveat to this conclusion is the Australian dollar (FXA). AUD/USD looks like it is bottoming right at support formed by the closes for 2010 and 2011. The chart below zooms in on the action since July to clearly show the impact of this support line (the thick, black horizontal line under 1.02500). If this bottom truly holds up, I will have to get bullish on the S&P 500 given the strong relationship between the S&P 500 and the Australian dollar. 
It seems unlikely that the wedge will break ahead of Friday’s labor report, so I am not expecting anything big for Thursday…but I am still watching warily.
On a quick sidenote, speaking of sitting right on the edge of resistance…Yelp.com (YELP) closed EXACTLY at its all-time closing high. As I mentioned in the last T2108 update, YELP seems poised for a big breakout given its behavior at this line of resistance is so different, and more constructive, than earlier blow-off tops.
Daily T2108 vs the S&P 500
Click chart for extended view with S&P 500 fully scaled vertically (updated at least once a week)
Black line: T2108 (measured on the right); Green line: S&P 500 (for comparative purposes)
Be careful out there!
Full disclosure: long SSO calls, YELP puts
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S&P 500: Bearish Divergence With A Caveat
Published 10/04/2012, 05:03 AM
Updated 07/09/2023, 06:31 AM
S&P 500: Bearish Divergence With A Caveat
T2108 Status
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