August 20, 2017

Archives for August 2006

The Bears Could Make Their Presence Known Very Soon

The holiday has lended a helping hand to the bulls. Thin volume and low volatility have been the norm this week, which is historically typical the week leading up to Labor Day weekend, no surprises here. I have to admit, even with the expected low volume, I did expect some weakness this week, but with the big boys out volume has been lower than usual and has caused some of the tightest intraday ranges in years. In the past, intraday trading ranges this tight have led to short-term declines several days out. Couple this historical precedent with an overbought situation in the four major indices and the gap from 8/16 that has yet to close and the probability of a short-term decline increases significantly. The one factor that could throw a … [Read more...]

How long will the tight trading range last?

The market experienced one of its tightest trading ranges of the year today as the S&P moved back and forth within a four point range. The last few times the market traded in a  range this tight it preceded a sharp directional move. Which direction will we go this time? Well, tomorrow is the last trading day before a very strong seasonal day, the last day of August. Historically, the last day of August/first day of September have been extremely bullish; however, the trading days following have been slightly weak. Furthermore, as I have repeated frequently over the past several posts, September is the weakest month for the market, so could the current overbought situation be telling us something. Over the short-term I am a little wary of … [Read more...]

Low Volume Lends a Helping Hand

Market performance has been somewhat suprising over the past few days. Gains have been limited, which is usually the case in an overbought market. Today's late-day rally brought the S&P back to the top of the two week trading range and also moved the Russell 2000 (IWM) and Nasdaq 100 (QQQQ) into an overbought state. The only major indice that is not in an overbought postion is the Dow Jones (DIA). I am still leaning towards the short-side of things for reasons that I have mentioned repeatedly over the past few trading days. Let me summarize: with the S&P sitting right below the top of the recent tight trading range (strong resistance) and in an overbought with the gap from 8/16 yet to be closed I still siding with th bears over the … [Read more...]

Expect the Sideways Movement to Continue

The trading week before the last summer holiday is historically slow and I do not expect to see a change in the pattern this week. The S&P (SPY)  and Nasdaq 100 (QQQQ) have moved into an overbought territory and a few other short-term bearish technical indicators are popping up on the screen. As a result, any attempt to extend today's gains will most likely be limited and should bring the sellers out over the short-term. The next few days are seasonally bearish and given the overbought situation and the gap from 8/16 in the S&P that has yet to be closed the probabilty of a short-term decline has increased. I would also point out that Thursday (the last trading day of August) has been seasonally bullish and so has the first few days of … [Read more...]

Tight Trading Range Continues

Volatility has been absolutely horrible over the past week. Volume has declined tremendously and will most likely continue until the end of summer holiday passes. This makes setups very difficult over the short-term. However, tight-trading ranges are usually followed by sharp directional moves. I have stated the following over the last few days, but I feel it is well worth repeating. I still think the market will move lower over the next few days testing the 1280 area (approximately) which should close the gap from last Wednesday and should move the S&P (and most likely the other major indices) into an oversold position. Seasonal weakness is upon and should last a few more days until the seasonally bullish transition from the end to the … [Read more...]

Calm Before the Storm?

Sideways trading continues as the summer doldrums are nearing the final stretch which is always good news for traders. Volume over the next few weeks will most likely continue to be slow as Wall Street has a tendency to take an extended vacation until after Labor Day has passed. Surely, volume will pick up after the biggest Wall Street Holiday, which hopefully means a widely vacillating market is right around the corner. I still think we are due for a decline that will most likely test the 1280 level (give or take a few points) on the S&P. The next three trading days are historically, seasonally weak so the probability of a move that would close the gap from last Wednesday increases slightly. Furthermore, the S&P has had difficulty with … [Read more...]

ETF Extremes

After the sharp rally last week our proprietary indicators signaled a buy alert on Monday. As a result, we bought 10 Oct06 131 puts (SFBVA) shortly after the open on Monday for $2.70. The overbought situation coupled with the gap up in the S&P last Wednesday (that has yet to close) increased the probability for success in the trade. Today our indicators signaled a sell and as a result we sold the Oct06 131 puts (SFBVA) for $3.10 resulting in a 14.8% gain on the trade. The sample portfolio is currently worth $6,565 or 31.3% (including commissions) YTD. The win ratio in the strategy currently stands at 100%, 7 out of 7, (check out the Performance page on our site for further details). Obviously we are pleased with the win ratio, but we are … [Read more...]

Where do we go from here?

The S&P remains overbought and the other major indices are not far behind. Furthermore, the S&P, Dow and Nasdaq have yet to close the gap from last Wednesday. I am still under the impression that the market should move lower, closing the gap within the next few days. An overbought state, in most cases, limits the upside potential over the short-term, so if the market is to resume the bullish rally from last week it needs to work off the current overbought situation. We shall see. Also, until volume picks up it is going to be hard to see any conviction from the bulls or the bears. The short-term should be interesting indeed. Have a great night! RSI Wilder (5) for August 23, 2006 SPY - 70.6 (overbought) DIA - 63.5 (overbought) IWM … [Read more...]

A Wonderful Expiration Month and Still Overbought

First, I want to say thank you to everyone for your kind words regarding the birth of our baby girl, Macey. Your good wishes were greatly appreciated. After every options expiration I try to report on the performance of our two strategies that we comment on occasionally in the blog. This expiration period was certainly kind to our ETF Extremes strategy. As I have mentioned repeatedly over the past few months, patience coupled with disciplined trading guidlines are what make investment (trading) strategies effective and this is especially the case in our ETF Extremes strategy. The strategy went without a signal for several months and many of our subscribers were worried about the lack of trading in the strategy. My response was patience, … [Read more...]

Celebrating the birth of our first child

I will not be posting any content for the remainder of the week as we are celebrating the birth of our beautiful baby girl. … [Read more...]