Typical Knee-Jerk Reaction

December 8, 2006

The Labor Department released the closely watched Nonfarm Payroll report today at 8:30 Est and showed an increase of 132,000 jobs during the month of November. Shortly after the release the market began the wildly vacillating trading day that we typically see following the monthly jobs report. Often the first major move following the report is a false one and today’s trading was no different. Sellers stepped in early and moved the market down to an area of strong support. It looked like the market was in for a dreadful day. However, after a few minutes of consolidation around an area of strong support buyers decided they had enough and stepped for the expected reversal.

Both the SPY and QQQQ were able to hold important support levels which could bode well for the market over the short-term. It will be important to watch these levles next week as the market moves into Options Expiration.

Historically, next week is the weakest period during the month of December (7th trading day through the 11th trading day). Monday, the 7th trading day of the month, is typically bullish which coincides with the historical pattern that occurs on the Monday of Options Expiration. However, the rest of the week is up for grabs as far as seasonal tendencies go. I mentioned before how next week is historically, the poorest performing week during the month of December, but the seasonal bias for next week’s pre-expiration period is slightly bullish.

Could we see the typical Tuesday Top this during this expiration period? (Often during expiration week Tuesday marks the high for the week.) I think it is quite possible given all of the bearish indicators that I have mentioned over the past several weeks, which is why it is very important to keep a close eye on the 141 area of SPY. If the market can break below that level and hold we could be in for a rough expiration period.

See you next week. Have a great weekend!

RSI Wilder (5) for December 8, 2006

SPY – 60.5 (neutral)
DIA – 58.4 (neutral)
IWM – 55.2 (neutral)
QQQQ – 45.2 (neutral)

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

Filed Under Crowder's Daily Market Commentary ·

Up 47.5%

December 7, 2006

Once again, our ETF Extremes strategy proved that patience pays. The strategy has only been exposed to the market for 38 out of 236 trading days so far this year or 16.1% of all tradable days. This is an amazing statistic considering most investors think that they need to trade or be exposed to the market on a daily basis to be successful.

A trade was signaled in our ETF Extremes strategy on Wednesday. The quick rise in the S&P last week has brought our indicators into an “extreme” state which triggered an alert in the strategy. At the time SPY was in an overbought state and our proprietary stochastic indicator was at an extreme state as well. When both of these indicators are in this type of territory the probability of a short-term move lower is high.

As a result we issued the following trade alert to our participating subscribers: Buy to Open SPY Feb07 143 Puts (SFBNM) for $3.10.

Much like our last two trades in the ETF Extremes, we were anticipating a sharp move lower shortly after the alert was sent. The market traded sideways for remainder of the trading day so obviously we decided to hold onto our position. The market finally moved slightly lower Thursday and as a result of the move lower, we were able to close the position for $3.30 or a 6.5% profit on the trade. By staying diligent and sticking with our guidelines we have had a 100% win ratio (10 out of 10 winning trades) YTD for a total YTD return of 47.5%.

Ahead of Friday’s release of the non-farm payrolls we decided it was best to take a profit off the table. The market can be extremely volatile and unpredictable once this data is released and because of that we wish not to take any unnecessary risks and would prefer to take the position off for a small profit.

strategy unique and so far, successful. Hopefully, we can continue our winning ways and extend the gains going forward.

Patience is the key ingredient to the success of this strategy and forcing a trade is, in most cases, detrimental to any strategy. Our exact words on the site are as follows: “This strategy requires patience coupled with a disciplined approach. The strategy will make approximately, on average 1 to 3 recommendations a month with holding periods of 1 to 15 days, however; there will be some months when no recommendations are made. The key to this strategy is patience. Waiting for the appropriate scenario to recommend trades with a high probability of success is what makes this strategy a success.”

Furthermore, we do know that with our money management and capital preservation techniques this strategy will be extremely profitable over the long-term. Our stop loss is usually set at $.35 per trade so it would take quite a few losing trades to move this strategy into negative territory. With a total YTD return of 47.5% we continue to be extremely enthused about the strategy. The combination of our two strategies, Gap Fade and ETF Extremes, has led to total YTD return of 25.6%.

Our returns are based on the baseline model (fixed number of contracts) because we believe reporting on cash basis is a more straight-forward and transparent method of reporting returns. Performance will vary depending on what % per trade you choose with your particular brokerage.

Our returns are based on the baseline model (fixed number of contracts) because we believe reporting on cash basis is a more straight-forward and transparent method of reporting returns.

Performance will vary depending on what % per trade you choose with your particular brokerage.

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Kindest regards,

Andrew Crowder

Chief Options Strategist

Crowder Investment Research, LLC

Filed Under Crowder's Daily Market Commentary ·

Tight Trading Range Leads To….

December 6, 2006

The market traded in a tight range today which often occurs ahead of the closely watched Non-Farm Payrolls report due out at 8:30 Est on Friday. Economists’ are predicting the number to come in at 115k up 21k from last months report. While this one event can often create a tight range bound market ahead of the data release, I think there are a few other factors at work.

I am still in the opinion that we will see short-term weakness over the next few trading sessions given the technical extremes that we follow. The S&P is still in an overbought state while the other major indices ahve moved back into neutral territory and the momentum and stochastic measures that we follow on SPY are at extremes. Furthermore, today marks the last day of the bullish seasonality that typically occurs during the first few trading days of December.

One additional note, typically when we see a tight, range-bound market we often witness weakness in the market over the next few days. As I mentioned before this could be a result of the jobs report due out Friday and given the low volume today it most likely is a major factor for today’s sideways movement, but as I mentioned before there are a few other nuances that we should consider in the current trading environment. I expect to see weakness over the next few days, but if the market continues to hold up amid all of the weakness that has recently invaded the market then I will have to reconsider my short-term expectations as we move into the first few trading days next week. December can be a very tricky month for traders so remember to stick with your trading guildelines and money management techniques.

Have a wonderful night and as always I will be back tomorrow afternoon!

RSI Wilder (5) for December 6, 2006

SPY – 71.4 (overbought)
DIA – 64.1 (neutral)
IWM – 64.4 (neutral)
QQQQ – 55.9 (neutral)

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

Filed Under Crowder's Daily Market Commentary ·

Overbought Again! Could we see a bear sighting over the next few days?

December 5, 2006

I mentioned yesterday how the momentum indicator that we follow moved back into an extreme state. Couple the momentum reading with three of the major indices (the Dow, Russell and S&P) moving back into overbought territory today and you typically have a high probability for a short-term reversal. Indeed, on the surface the market looks strong, but there are some underlying short-term and long-term indicators that suggest a move lower is in the cards. Historically, the first few trading days of December are seasonally bullish which, in many cases, can keep the market afloat especially during the month of December.

I would also like to point out that the Nasdaq 100 is the only major indice that is not participating in the sharp move higher. Today’s move makes a stronger case that a top is possibly forming which just another reason to keep a close eye on how the market, and more specifically, the tech heavy NDX reacts over the next few trading sessions. Keep a close eye on the 1800 level of the NDX. If we get a break below that level that holds we could be in for a nice short-term trade going forward.

RSI Wilder (5) for December 5, 2006

SPY – 74.6 (overbought)
DIA – 70.7 (overbought)
IWM – 72.3 (overbought)
QQQQ – 63.4 (neutral)

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

Filed Under Crowder's Daily Market Commentary ·

S&P Breaks Through Overhead Resistance. Will the Breakout Fail?

December 4, 2006

The S&P 500 broke through a stingy level of strong overhead resistance today to close at a six year high. The move higher today was a continuation of the intra-day oversold bounce that occurred Friday and seemed to surprise quite a few traders on Wall Street. The problem with this move is that I am not so sure it is sustainable. The S&P seems to have hit a peak in one of our short-term indicators which, in the past, has often led to a short-term pullback over the following week. Given the accuracy of this momentum indicator I have to lean with the probabilities and side with bears on this one. In my opinion, we could be in for a failure of today’s breakout over the short-term.

If you would like to know more about what indicators we use and how we trade them please subscribe to our service. We know many of you come here on a daily basis for trading information and we appreciate the loyalty, but without your financial support, the blog will have to move to a completely subscription-based model. This option is unappealing to all sides, but we know the information we provide to our paid-subscribers is top notch and making the blog subscription-based will only add to the value of our members’ subscriptions.

We work hard to bring you up to date information and some of the best investment strategies around. We offer two auto-trade strategies, both of which are in positive territory and one, ETF Extremes is up 44% on the year, soundly beating the market. Diversifying with both of our strategies that are auto-traded and you would have returns of 23.9%, also well above the returns of the market. Please do not hesitate to call one of the auto-trade services listed on our site to verify the accuracy of our performance and our service. We offer performance statistics on our site, but we understand the importance of taking due diligence a step further. We encourage it! So go ahead, give them a call.

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RSI Wilder (5) for December 5, 2006

SPY – 69.00 (neutral)
DIA – 62.5 (neutral)
IWM – 71.7 (overbought)
QQQQ – 59.0 (neutral)

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

Filed Under Crowder's Daily Market Commentary ·

Snowy Friday Sell Off Closes Wednesday’s Gap

December 1, 2006

The upside gap that occurred in the S&P on 11/29 closed today as economic woes continue to linger within the market. The gap closed around 2:30 EST and bounced higher immediately following the close. I talk about the gap phenomenon quite often in the newsletter and recently in the blog.

I actually placed a trade buying SPY 141 puts for $1.75 per contract on 11/30 and sold today shortly after the gap closed for $2.50 per contract. Once gaps of this magnitude close they typically reverse direction and start to move back in the direction of the gap. This is why I sold shortly after the gap closed. Knowing that this typically occurs why would I jeopardize a 43% gain. Had I waited until the trading session was over I would have actually broken even at best. The bid/ask spread was $1.70 to $1.80 so I would have been lucky to get $1.75 and even then I would have had a losing trade due to the cost of commisssions. I am never greedy… okay, almost never. I talk about how I trade gaps in great detail in my White Paper. Check it out, I think you will find that it is a valuable resource.

RSI Wilder (5) for December 1, 2006