Is T2108 Already Indicating a Bottom?
By Michael on Jul 26, 2007 in Stock Market
So I was looking through my charts today and was shocked when I got to T2108 (Worden’s indicator for % of NYSE stocks above their 40-day moving averages). While the indices have been steadily hitting new highs (notably excluding the Russell 2000 and financials) T2108 has been trending down. In other words, a greater percentage of NYSE stocks were slipping below their 40-day moving average as the indices were climbing to new highs. Bulls might choose to call that a stock picker’s market. Others, like me, refer to it as unhealthy.
Here are charts of T2108 and the NYSE Composite Index:
Aside from the glaring negative divergence in T2108 what really struck me about T2108’s chart is that it’s already below its *magical* 20. As I’ve posted many times before, 20 on T2108 is typically a sign a of a decent bottom and a buy signal. Usually T2108 hits 20 after an ugly slide and the indices are at multi-month lows. This time we’re just off of fresh multi-year and all-time highs on many indices. My gut tells me that there’s still a lot of air under the indices but T2108 indicates that we’re near a bottom. Interesting times…
Note: Non-Worden subscribers may want to look at similar indicators at StockCharts.com, like $SPXA50R, $NYA50R and $NAA50R.
Tags: T2108, Technical Analysis
12 Comment(s)
By Dr. Duru on Jul 26, 2007 | Reply
Sure, NOW you alert us to the divergence!
I haven’t looked at T2108 (or its cousin T2107)in a very long time. You just reminded us of the importance!
By Michael on Jul 26, 2007 | Reply
I also hadn’t looked at it in a long time. But I whined about the weak upside/strong downside volume for weeks.
By Keith Shepard on Jul 26, 2007 | Reply
Buy now? You first.
Is this going to be a record volume day? (SPY) is over 303,000,000. I don’t have all my historical data available, but I think that’s record volume on the (SPY).
By Keith Shepard on Jul 26, 2007 | Reply
Holy smokes…my short portfolio is in 7th heaven and my long portfolio was knocked out early. Woof. $TRIN just shot to the moon and back in the past 10 minutes. Someone hit the “big red” button.
By Michael on Jul 26, 2007 | Reply
yeah man, it’s fugly out there. Brokers look like death
By howard lindzon on Jul 26, 2007 | Reply
you buy financials when blood is on the street and cash flow matters. cant believe people held on to those pigs this long.
i love when you post this stuff. took down some smh calls at $38 tick.
you generally rally or crash from these type of readings. betting on a crash is fun but rather bet on the bounce
By Dr. Duru on Jul 26, 2007 | Reply
I’m with you Howard.
By Tim on Jul 26, 2007 | Reply
T2108 reading of 20 or below usually at least leads to a bounce of some type. T2107 still has more room on the downside before it gets below 30 which usually indicates a longer term bottom.
By downtowntrader on Jul 26, 2007 | Reply
Hey Mike,
I posted on T2108 a couple of nights ago noting the same thing. I think the rotation into large caps has held the NDX and Dow up, while the broader markets (especially mid and small caps) were slipping into a correction. Hence the divergence with the Indices. Either way, I totally agree that it is unhealthy, although probably a sign of a bounce coming.
Joey
By Deborah on Jul 28, 2007 | Reply
Interesting indeed…
I’m choosing to watch…
By pat mccarroll on Jul 29, 2007 | Reply
Mike, how do I get a plot of T2108 from Bloomberg? Thanks, Pat.
By Michael on Jul 30, 2007 | Reply
Pat,
I don’t know, I’ve never used a Bloomberg terminal.