I love the T2108 in markets like this. When volatility is at extremes, there is no better indicator out there for gauging market direction and how close we might be to a bottom.
The bad news, is that a bottom might not be achievable just yet. Of course that doesn’t mean bounces can’t occur, but an ultimate bottom like what we saw back in February, or then again in August, isn’t quite there yet.
What the T2108 measures, is the percentage of stocks trading above their 40-day moving average. Right now it is at 26.4%. Just two days ago it was trading at over 70%. So yes, quite the move for less than two days of trading action.
Historically, the bounces start taking shape once the indicator starts showing 13-15% of stocks trading above their 40-day moving average. As you can see, the T2108 still needs to shave off another 50%.
Take the last two major sell-offs – the one last August and the one that bottomed out in February, and the T2108 reached extreme lows of 5.99% and 3.81%, respectively. II expect to see a similar type of pattern where the T2108 gets into the single digits before an ultimate bottom is found in this market.
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