T2108 Update – Much Ado About Nothing: From Raucous Open To A Stalemate Close

T2108 Status: 55.2%
T2107 Status: 49.7%
VIX Status: 14.9 (jumped above 15.35 pivot at one point)
General (Short-term) Trading Call: Hold.
Active T2108 periods: Day #36 over 20%, Day #34 over 30%, Day #31 over 40%, Day #29 over 50% (overperiod), Day #4 under 60% (underperiod), Day #106 under 70%

Reference Charts (click for view of last 6 months from Stockcharts.com):
S&P 500 or SPY
SDS (ProShares UltraShort S&P500)
U.S. Dollar Index (volatility index)
EEM (iShares MSCI Emerging Markets)
VIX (volatility index)
VXX (iPath S&P 500 VIX Short-Term Futures ETN)
EWG (iShares MSCI Germany Index Fund)
CAT (Caterpillar).

The stock market threw me for another loop. After sounding a loud bearish alarm in the last T2108 Update, I was prepared for Tuesday’s bearish open. I was however NOT prepared for the rapid and convincing bounce back from the lows.

T2108 dropped as low as 47.5% while the S&P 500 plunged in the first hour of trading almost to its lower-Bollinger Band (BB). The volatility index soared above the 15.35 pivot point. It was all looking like convincing follow-through for the bears. However, I think the currency market helped throw the day for a loop.

The Japanese yen had been gaining strength throughout the Asian and European trading sessions. Perhaps it was a race to cover shorts, perhaps stops were getting taken out. Whatever it was, the strength in the yen accelerated in the first hour of U.S. trading. It led to a classic V-shaped bottom where the recovery was as swift as the bumrush to the bottom. The S&P 500 and the U.S. dollar (DXY) versus the Japanese yen (FXY) (USD/JPY) bottomed together. Buyers never looked back as they ran stocks right back up the flagpole.

The S&P 500 managed to finish with a mere 1-point loss. The day ended up looking like much ado about nothing. It left behind a very long hammer pattern. If buyers manage to keep the index pushing to a higher close, suddenly the market will look like it just washed out another set of weak hands.

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Author: Travis Esquivel

Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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