I am going to do things a bit different over the next few days. I want to show the Fibonacci Retracement levels for the benchmark ETFs I follow in the ETF Extremes options strategy. We can reference these levels as we go along and when certain important levels are hit, especially when they coincide with an overbought or oversold levels. I will also be presenting more Fib charts going forward with different time frames, but I will keep it confined to the ETFs I follow for the strategies so please do not ask for additional fib charts.
By the way have you checked the performance of the ETF Extremes strategy lately. It is up 147% since its inception over 30 months ago. Bear market, bull market, neutral, the ETF Extremes doesn’t care.
10 Year look at the NASDAQ 100 (QQQQ)
Click the thumbnail for the full image
As you can see the price of QQQQ sits right below the 38.2% retracement level which should act as a strong area of overhead resistance. The index is in a neutral state so we are not seeing any extremes at the moment, however; I expect to see the ETF struggle with the 38.2% retracement level going forward.
Random Market Comments
I still think we are headed lower going forward. Just take a look at my post from a few days ago on the 1932 Short Selling Ban. Several other stock markets have imposed such bans with similar results.
Most recent, the Karachi Stock Market (Pakistan) imposed a short selling ban only to see the stock market plummet after an initial 9% surge after the government intervention was announced and upwards of 15% a few days later. However, their market quickly rolled over and eventually lost 30%.
I am not stating that the U.S. market will suffer nearly as much, but I also do not think we are headed higher any time soon. I do not think the bailout will serve as a positive over the short or intermediate-term, especially when the short-selling ban is lifted in early October.
Moreover, have you seen the economic reports lately? They continue to be absolutely horrid, yet the focus remains on the bailout. Well, once the bailout is over and the market begins to focus on the economic indicators I think we are due for another sell off.
As you all know I usually try not to bother with the news at hand, but I just can’t resist at the moment.
Back to the Technical Mumbo Jumbo
Anyway, back to the current technical state of the market. Nothing new here. What a surprise, eh? I expect to see another test of the lows over the next few weeks. Hopefully, over the short-term we can watch a few extremes enter the market. I have been patiently waiting on the sidelines for the smoke to clear which is often hard to do as a trader. As always, I will wait for a high-probability situation to present itself and then act accordingly.
Have a great night! (I will try to post a few interesting reads later tonight if I have some free time)
- My good friend Tim Knight, founder of Prophet.net, has two things for you to remember in this crazy market.
Overbought-Oversold levels for September 25, 2008
ETF Extremes Options Trading Strategy
* S&P 500 (SPY) – 50.3 (neutral)
* Dow Jones (DIA) – 50.2 (neutral)
* Russell 2000 (IWM) – 44.6 (neutral)
* NASDAQ 100 (QQQQ) – 47.9 (neutral)
Sector ETF Extremes Options Strategy
* Biotech (IBB) – 53.2 (neutral)
* Consumer Discretionary (XLY) – 41.6 (neutral)
* Health Care (XLV) – 48.3 (neutral)
* Financial (XLF) – 53.4 (neutral)
* Energy (XLE) – 58.5 (neutral)
* Industrial (XLI) – 38.0 (neutral)
* Materials (XLB) – 37.8 (neutral)
* Real Estate (IYR) – 48.1 (neutral)
* Retail (RTH) – 39.6 (neutral)
* Utilities (XLU) – 52.6 (neutral)
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