AT40 = 35.8% of stocks are trading above their respective 40-day moving averages (DMAs)
AT200 = 46.9% of stocks are trading above their respective 200DMAs
VIX = 11.4 (14.0% decrease)
Short-term Trading Call: neutral

Commentary

Since last Thursday when I lasted posted Above the 40, AT40 (T2108), the percentage of stocks trading above their respective 40-day moving averages (DMAs), increased 4 percentage points. AT200 (T2107), the percentage of stocks trading above their respective 200DMAs, is flat since then. T2107 takes some of the shine off the rebound from Thursday’s low that today sent the S&P 500 (SPY) closing above its 50DMA. The Nasdaq and the PowerShares QQQ ETF (QQQ) also closed above their respective 50DMAs. Note the the 20DMA for each index is in decline.

The S&P 500 (SPY) surged a percent to regain its 50DMA support.

The Nasdaq made an even clearer statement with 1.4% gain that took the tech-laden index well above its 50DMA.

The PowerShares QQQ ETF (QQQ) made a very clean gap up over its 50DMA.

The big dramatic change occurred in volatility. As has been the case for a while, the last spike could only sustain flight for a few days before completely imploding. The volatility index (VIX) cratered from 15.6, just above the critical 15.35 pivot, to 11.4, hovering just above the level I consider to be “extremely low.”

Imagine that – another volatility implosion. The VIX lost 14.0% on the day.

While I missed trading this latest volatility fade, I jumped at the opportunity to re-establish my standing call options in ProShares Ultra VIX Short-Term Futures ETF (UVXY). For good measure, I also bought puts on ProShares Short VIX Short-Term Futures ETF (SVXY). With the indices above their 50DMAs, I consider these positions to be hedges, not bearish bets. My short-term trading call stays at neutral until the S&P 500 closes above when I lasted posted Above the 40. Unlike my last short-lived switch to bullishness, I am not rushing to get ahead of a reflex bounce from “close enough” oversold conditions (AT40 in the low 30s%).