T2108 Update and Its Impact on Stocks Going Forward

This is one of the few indicators that I follow a great deal. 

This isn’t a tell-all indicator that knows exactly the direction the market will take, instead it is a tool that gauges the temperature of the market to see how well it is doing under the surface. Kind of like taking the temperature of one of your kids to see if he has a fever.  

The S&P 500 has been messy, and I mean really messy over the past month or so. There is an uptrend off of the July lows in place, but lets face it, it is an ugly uptrend to say the least. 

On the T2108, which measures the percentage of stocks trading above their 40-day moving average, you have a much clearer picture being painted. 

Simply put, there is a nice series of higher-lows in conjunction with about 4.5 months of lower-highs that creates a serious level of declining resistance here for the indicator that it has been unable to break through. 

But couple that with a support level that is connected by the December lows and the July lows, and you have the potential for a long-term, falling wedge pattern that could be broken here very soon. 

Take a look for yourself:

You take the overall trend of T2108 going back to February of this year which started a wicked six month period of consolidation, and you’ll find that the T2108 has trended lower overall. However the action of the past month or so suggests that the tide might actually be turning back up now. 

If that is the case, then this bodes well for stocks going further as the chart above suggests that the damage over the past two weeks has been rather minimized and conditions over the past month have actually improved under the surface.