(T2108 measures the percentage of stocks trading above their respective 40-day moving averages [DMAs]. It helps to identify extremes in market sentiment that are likely to reverse. To learn more about it, see my T2108 Resource Page. You can follow real-time T2108 commentary on twitter using the #T2108 hashtag. T2108-related trades and other trades are sometimes posted on twitter using the #120trade hashtag. T2107 measures the percentage of stocks trading above their respective 200DMAs)

T2108 Status: 63.6%
T2107 Status: 51.4%
VIX Status: 13.8 (held 2-month closing low)
General (Short-term) Trading Call: Hold (bullish positions); aggressive bears can short with a tight stop at fresh all-time highs
Active T2108 periods: Day #19 over 20%, Day #17 over 30%, Day #14 over 40%, Day #12 over 50%, Day #7 over 60% (overperiod), Day #89 under 70% (underperiod)

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).

A ray of hope just opened for the bears…or a fresh nightmare is about to begin. This is the dichotomy the technical signals are flashing to me right now.

The S&P 500 (SPY) has made almost no progress all week: 8 points for a 0.4% gain so far. The last three days have been true stalemates with candlestick patterns known as “evening stars.” These are typically topping patterns at the end of a run-up. An evening star proceeded the sell-off that led to the October correction. An evening start that started the month of November only stalled the rally for another day.

Is the S&P 500 topping out again?

This week’s pattern of evening stars matter a lot more because at the same time T2108 closed down ominously just short of overbought (70% or higher) – a little similar to what happened in September.

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