AT40 = 70.5% of stocks are trading above their respective 40-day moving averages (DMAs) – Day #1 of an overbought period
AT200 = 66.0% of stocks are trading above their respective 200DMAs (a TEN MONTH HIGH)
VIX = 11.1
Short-term Trading Call: bullish

Commentary

The S&P 500 (SPY) made another all-time high as it continued its remarkable melt-up through its upper-Bollinger Band (BB) channel. The sideline drama of the U.S. government shutdown barely caught the market’s attention; with the can kicked down the road yet again, the market is blithely ignoring the potential for future drama.

The S&P 500 (SPY) rocketship just keeps powering higher…just barely avoiding going parabolic by following a straight (diagonal) line up.

I was hoping a continued rally would send volatility a lot lower. The VIX did pullback notably for two trading days but the fade ended abruptly on Tuesday (January 23rd). The ProShares Short VIX Short-Term Futures (SVXY) popped nicely on Monday, but a stall on Tuesday helped to send the value of my SVXY call option careening lower. The prospects for a fresh surge in SVXY this week now look dim.

The volatility index, the VIX, stopped its latest implosion even as the buying in the stock market continued apace.

AT40 (T2108), the percentage of stocks trading above their respective 40-day moving averages (DMAs), is back to cooperating with the bullish signal by powering through the 70% threshold for overbought territory. Perhaps more importantly, AT200 (T2107), the percentage of stocks trading above their respective 200DMAs, closed at a 10-month high. The signals have converged convincingly onto bullish signals.

In the middle of the celebration and the exuberance, I want to point out that AT40 is effectively in unchartered territory. The last time AT40 closed in oversold territory (below 20%) was 480 trading days ago. At that time, I called the end of the oversold period the JP Morgan Bottom. The S&P 500 closed at 1864.78 on that day. The index is up a breathtaking 52.2% since then.