Take a look at one of my favorite stock market indicators

I haven’t done a post exclusively on the T2108 in a long time, so I thought today would be a good day to do exactly that as the market has put together a very nice week so far and warrants a review of the underlying health of this market via the T2108 indicator, which is one of my favorites out there.

Essentially what the T2108 does is measure the percentage of stocks that are trading above their 40-day moving average. 

Very simple. Very straight forward.

If the market is rallying higher to new all-time highs but only 45% of stocks are trading above the MA and in particular diverging from price action, well then, that is a very good sign that the market might be on a rally that won’t last very long.

So what about this rally then, the one this week that broke out of a perfectly formed bull flag pattern? 

Right now, as I type out this post it is at 65% and as high as 72% yesterday. So a little bit of a pullback off of yesterday’s highs, but that is to be expected.

Is it a healthy reading? It is a decent reading. It has broken out of a price range that it has been stuck in since early march, so that is significant. and considering that only 2 weeks or 10 trading sessions ago, it was trading below 40%, I would say that stocks as a whole has validated this big price move that has seen the Nasdasq and Russell hit new all time highs this week, and the S&P 500 and Dow Jones Industrial Average trading near those highs.

I really don’t have any qualms with the state of the T2108 indicator. It is validating the price move we have seen across the indices, and expect that we will see more upside in the week ahead.

Here’s the T2108 Chart