Expect much of the same

It should be a rather boring week for traders. With the mid-terms elections right around the corner expect to see a short-term trading range environment over the next few days. The market is currently in the middle of a fairly strong seasonal period so I would not be surprised if we tested the recent highs. However, I do expect to see a decent correction after the polls close. The market can only carry so many bearish indicators before a short-term correction occurs. Have a great night!

RSI Wilder (5) for October 31, 2006

• SPY - 62.2 (neutral)
• DIA - 51.4 (neutral)
• IWM - 59.1 (neutral)
• QQQQ - 60.2 (neutral)

Trading range until mid-term elections are over?

First of all I wanted to remind everyone that the first issue of our new semi-monthly newsletter will be out on Wednesday November 1st. The newsletter will include our two current option strategy models plus one additional option strategy (Short Iron Condor) and our first stock-based ETF model. Each issue will also include articles on investment strategy tips, sentiment and technical research, and personce finance. Give it a try, we are certain you will find the information in all of your investment endeavors.

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The market is in the midst of some strong seasonal bullishness. I have stated several times over the past week how the end of October/beginning of November typically sides with the bulls. I would not be surpised to see the a test of the recent highs this week alothough with the mid-term elections about a week away I would be surprised to see the market break through that level. The market will most likely stay within the current trading range until the elections pass. A change politically could spark a correction that extends well into November. Only time will tell. Have a great night!

RSI Wilder (5) for October 30, 2006

• SPY - 56.9 (neutral)
• DIA - 55.8 (neutral)
• IWM - 59.1 (neutral)
• QQQQ - 57.3 (neutral)

Andrew Crowder, Chief Investment Strategist, www.crowderinvestments.com

The Nasdaq and Russell having problems with overhead resistance

Yesterday I stated:I am more interested in the Nasdaq 100 and Russell 200 at this juncture because both are reaching an area of very strong resistance. I will be watching how these two indices perform over the coming days. If we see both indices struggle a trade could be in the cards.

Well, bothindices had problems today fom the get go. Today’s initial decline came on poor GDP numbers. The market worked its way back to close to breakeven only to have Goldman come out with a bad report on the semiconductors. This usually does not bode well for the market going forward. I would be surpised to see the bulls pay over here especially with next weeks bullish seasonality. I will be watching how NDX reacts to the 1730 area early next week. This area should act as a pivotal area going forward.

Next week will be the first issue of our new semi-monthly newsletter. We are very proud of the product and know that it will serve the “little guy” well in his/her investing endeavors.

RSI Wilder (5) for October 27, 2006

• SPY - 60.0 (neutral)
• DIA - 59.6 (neutral)
• IWM - 52.8 (neutral)
• QQQQ - 49.1 (neutral)

Andrew Crowder, Chief Investment Strategist, www.crowderinvestments.com

Extremely Overbought

The S&P has not seen overbought conditions this extreme in quite some time. Futhermore, the stochastics that we use are almost pegged which almost always signals a short-term reprieve. We have not seen our technicals move into this type of extreme territory in years. As we into a period of seasonal bullishness (beginning of the month/end of the month) I am a little hesitant to short here. Things could change, but I would want to see sustained weakness for longer than a few hours. I am more interested in the Nasdaq 100 and Russell 200 at this juncture because both are reaching an area of very strong resistance. I will be watching how these two indices perform over the coming days. If we see both indices struggle a trade could be in the cards. Until tomorrow. Have a great night!

RSI (5) for OCtober 26, 2006

• SPY - 93.4 (very overbought)
• DIA - 89.4 (very overbought)
• IWM - 79.3 (overbought)
• QQQQ - 74.9 (overbought)

Andrew Crowder, Chief Investment Strategist, www.crowderinvestments.com

 

Up, up and away?

Today’s price action was typical for a Fed annoucement day. Sideways trading dominates the trading day until volume dries up several hours before the Fed announcement at 2:15 EST and then the market vacillates widely for a half hour after the release followed by a directional trend into the close.

The trend that lasts until the close is often reversed over the next few trading days. Chasing the trend can be risky. The S&P (SPY) and Dow (DIA) are “very overbought” while the Russell (IWM) and the Nasdaq 100 (QQQQ) seems to be struggling with some decent overhead resistance. I would not be surpised to see a reprieve over the next few days followed by the seasonally bullish end of month/beginning of the month period. As we move closer  to the mid-term elections I will have some other interesting seasonal tendencies.

Sorry about the short posts, I am working diliegently on the new newsletter. The newsletter will be more comprehensive and we are offering a few additional models including our first stock-only model portfolio. Our goal is to educate the “little guy” on alternative investment strategies and capital preservation techniques by allowing them to follow our model portfolios. Hopefully, subscribers will find value in the newsletter. I have certainly worked hard to create a quality product. The first issue is out on Novermber 1st.

RSI Wilder (5) for October 25, 2006

• SPY - 91.6 (very overbought)
• DIA - 89.1 (very overbought)
• IWM - 71.0 (overbought)
• QQQQ - 65.7 (neutral)

- Andrew Crowder, Investment Strategist

 

Fed Meeting

Trading should continue to vacillate in a tight range until the Fed report is released tomorrow afternoon so there is not much to say until that event has passed.

I am working diligently on the new newsletter, particularly the new model portfolio based on EFTs (stocks only). I apologize for the short post. I will be back (maybe in the morning) tomorrow with the regular post.

RSI Wilder (5) for October 24, 2006

• SPY - 88.8 (very overbought)
• DIA - 87.8 (very overbought)
• IWM - 61.4 (neutral)
• QQQQ - 55.7 (neutral)

S&P’s Wild Ride

Another bullish day for the market and quite possibly the top for the week. I write this for several reasons. First lets look at the short-term seasonal picture. Historically, the trading day following options expiration is bearish. October is the exception. The trading day following October options expiration is decisively bullish. However, the bullishness quickly ends as the rest of the week moves back to the seasonally bearish post-expiration period.

Second, when the market trades in a tight range for several days and finally breaks out, the initial move is often a false move. This is more of a short-term phenomenon and I fully expect the bulls to move in at key support levels.

Third, all of the other reasons I have stated over previous posts lately: the VIX (historically low), major indices are back in a very overbought state, and a few others I have mentioned previously. Also, check out the previous posts regarding the mid-term elections. 

Sorry to keep it so short this evening. I am working diligently on added features for the blog which should start to trickle out over the next few weeks. Have a great night!

RSI Wilder (5) for October 23, 2006

• SPY - 85.5 (very overbought)
• DIA - 85.2 (very overbought)
• IWM - 58.1 (neutral)
• QQQQ - 72.6 (overbought)

If you like what you read on a daily basis, you should check out our service! We offer educational tools, research, a semi-monthly newsletter and best of all, detailed trading guidelines to our strategies at Crowder Investment Research, LLC.

Andrew Crowder, Chief Investment Strategist, Crowder Investment Research, LLC

Sideways trading typically leads to sharp moves

I feel like I have been so repetitive lately, but I guess that is to be expected during periods of tight range-bound markets. Options expiration was once again uneventful (as was the entire week of trading). The S&P and Dow remain in an overbought position and the VIX is back at historical lows, closing the day at 10.63.

I stated on 10/13 that ”going back over the previous year whenever the VIX reached a level this low while in an “overbought” to “very overbought” position this signaled a short to intermediate-term decline. Furthermore, I looked back to see how the market reacted when all four major indices were in a “very overbought” and this was also a good signal that a short-term reprieve was right around the corner.”

The market was in a similar situation last month. I stated in the blog during last options expiration that “historically, when the VIX reaches a level this low this usually precedes a short to intermediate-term decline and with all of the info that seems to be piling up on the bears side we should expect the same result this time around. We must remember the week of options expiration can be extremely volatile and can often fool many into adding positions that ultimately fail. Will this time be different? No one knows for certain, but with all of the information that we have sitting in front of us I can only side with the probabilities and this time (at least over the short-term) they are leaning towards the bearish camp. Only time will tell.” The market traded sideways during September’s week of option expiration only to move lower the following week.  

By the looks of it we could see a similar short-term reaction next week. However, it would not surprise me to see a breakout to the upside early in the week before the correction comes. Typically, when the market trades in a tight range like it has over the last six sessions we will see a breakout ,which in most cases, is a false move. Have a great weekend!

RSI Wilder (5) for October 20, 2006

• SPY - 77.2 (overbought)
• DIA - 72.0 (overbought)
• IWM - 55.0 (neutral)
• QQQQ - 58.0 (neutral)

Andrew Crowder, Chief Investment Strategist

Options Expiration

As expected, the market continued to trade in a fairly tight range today. Typically,  as the market moves closer to options expiration, the trading range gets tighter. However, post-expiration is a different story. Historically, the trading session (and the week for that matter) following options expiration is overwhelmingly bearish. The odds increase dramatically when the market is in an overbought state. This means that if the market holds up tomorrow the probablity of a move lower on Monday increases substantially. This could be a decent short-term play. As we all know nothing is certain in the world of trading. A disciplined approach with an appropriate stop-loss goes a long way to your success as a trader. Always define your risk before entering a trade. I should also note that seasonal tendencies have not held up well as of late.

As Todd Harrison (a great trader, and recently quoted on the www.thekirkreport.com) states “Opportunities are made up easier than losses”. So if you let a few pass you by don’t dwell on what could have been. There will always be more opportunities around the corner. Remember, this is a marathon not a sprint. Have a great night!

RSI Wilder (5) for October 19, 2006

• SPY - 76.7 (Overbought)
• DIA - 86.4 (Very Overbought)
• IWM - 78.8 (Overbought)
• QQQQ - 53.3 (Neutral)

If you like what you read on a daily basis, you should check out our service! We offer educational tools, research, a semi-monthly newsletter and best of all, detailed trading guidelines to our strategies at Crowder Investment Research, LLC.

Andrew Crowder, Chief Investment Strategist, Crowder Investment Research, LLC

What to expect as the market moves closer to options expiration

Several key economic indicators, namely the core CPI, were reported before the bell and the S&P futures responded favorably. The S&P sat in an overbought position and the move higher pushed it further in that direction. When the market sits in an overbought position like it was immediately following the opening bell, the probability of an opening gap closing increases. The large gap opening did close approximately an hour only to once again back by the end of the trading session.

Typically, the market will trade in a tighter range as it moves closer to options expiration. I really do not think we will see anything different this time around. Keep a close eye on the 1360 level of the S&P and the 1700 level on the S&P. These are key support levels that if broken could lead to a short to intermediate term correction going forward. So far each attempt over the last two days to push the market below these levels has been unsuccessful. If the market is able to hold above these levels going into post options expiration then we should see the typical short-term post-expiration bearishness. This usually only lasts for a day or two but it happens to be a fairly accurate seasonal measure, especially if the market is in an overbought state.

Traffic to the website has been outstanding especially after being featured and quoted recently in the Wall Street Journal and several Italian financial publications. We appreciate all of the positive feedback and hope to continue bringing you the best newsletter around.

Before I mention today’s trading results I would like to let you know that we are now offering a new and improved semi-monthly newsletter. The new newsletter includes the following:

• Monthly Strategy Performance Report – Follow our strategies so that you can learn how to effectively trade them on your own
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• Buy to Open the SPY Dec06 138 puts (SFBXH) for $2.55 just after the open. Slightly after 10:30 EST the gap closed so we decided (per the guidelines) it would be best to take off our position at that point.  We closed out the position selling the Dec06 138 puts (SFBXH) for $2.80, or a 9.8% gain on the trade.

As we state on our website, the ETF Extremes, which is up 35.7% YTD, with no losing trades YTD, is a wonderful hedging strategy for the Gap Fade. When combining both sample portfolios YTD the strategies are up a respectable 19.7% YTD. Please do not hesitate to email us with any questions or comments.

Crowder Investment Research, LLC

 

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