October 24, 2014

Market bounces, but will it last?

www.thekirkreport.com) said it best today, "when in doubt, stay out." Everything tells me to jump in here, but I think I will wait to see if the market settles lower after the obvious jump today. I am certainly not in a hurry (i never am) to take a position and I plan on patiently waiting until another highly probable set-up rolls around. Stay patient and disciplined and always think in probabilities! Mark Douglas, author of Trading in the Zone states it best, "the best traders/investors stay in the flow because they don't try to get anything from the market; they simply make themselves available so they can take advantage of whatever the market is offering at any given moment". That pretty much sums up our ETF Extremes strategy and the … [Read more...]

ETF Extremes looks good in this market. Could DIA bounce off of current levels?

Where to begin. Wow! The correction that I had been anticipating for several months finally came all at once today and who knows if there is more to come. SPY moved to lows not seen since 11/28. Three months of gains vanished in one day, amazing. Once again, our ETF Extremes strategy proves that patience pays. The strategy has only been exposed to the market for 45 out of 286 trading days since it was initiated or 15.7% of all tradable days and is up 42.7%.  During that same time frame SPY is higher 11.5%. 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. However, i must say, if we knew that the market was going to be down this much … [Read more...]

Another Successful Trade in the ETF Extremes. DIA looks like it could bounce!

First, I would like to mention that our ETF Extremes strategy had another successful trade today. We made 6.2% on the trade. Our win ration since we initiated the strategy at the start  of 2006 is over 91% (11 out of 12 trades) for a cumulative total return of 42.7%. Slow and steady. Patience coupled with proper money management is the key to the strategy's success. As for the current state of the market, the major benchmarks, DIA and the S&P are nearing oversold and the higher-beta IWM and QQQQ have pushed back to short-term oversold levels (not published below). Furthermore, it looks as though the high-beta indices bounced sharply off their support levels which has been the norm since the rally began back in mid-July. I would expect … [Read more...]

Short-term bearish signals

As expected IWM backed-off today. I stated yesterday how the high-beta index had reached overbought levels not seen in over a year. The move lower brought the index into a neutral state. However, the other high-beta index that I mentioned yesterday, QQQQ, remains in an overbought state. This indicator among other bearish signals could pose a problem for the bulls over the short-term (1-5 days). The PHLX Semiconductor index (SOX), which consists of 19 stocks, 10 of which are listed in the tech-heavy Nasdaq 100 (QQQQ),  could be the culprit in what I think will be a short-term decline over the next few trading days. If you look at the chart (SOX) you will notice that the index gapped higher two days in a row without closing either gap. … [Read more...]

IWM at extreme levels

What is important is how you manage that trade. and we will do our best to save you a spot once we make the portfolio live, which will occur after the March expiration cycle. Overbought/Oversold levels for February 22, 2007 SPY - 66.5 (neutral) DIA - 42.1 (neutral) IWM - 87.1 (very overbought) QQQQ - 80.9 (very overbought) OIH - 66.8 (neutral) GLD - 68.1 (neutral) We work hard to bring you our latest views, opinions and research on a daily basis. If you are a loyal reader and find our thoughts useful please show us your support by joining our newsletter service.  We currently follow 3 stock option strategies and one stock-based strategy in our investment newsletter. All of our strategies use ETFs as … [Read more...]

Higher-beta sectors in an overbought state. OIH bounces.

After a slow start the market managed to snap back again today. The higher-beta Nasdaq 100 (QQQQ) and Russell (IWM) led the way and finished near their respective highs for the day. The move pushed QQQQ into overbought territory and IWM further into a very overbought state. Typically, we see weakness over the short-term(1-5 days) when our indicators move into this type of extreme, but as we all know, in a momentum driven market the likelihood for a continued move to the upside is possible. This is why it is imperative to implement a stop-loss plan if you decide take a position at this juncture. IWM has moved lower over the short-term (1-5 days) every time it has reached this level over the course of the last year. Hopefully, it will … [Read more...]

Is the Russell near a short-term top? OIH is back in oversold territory. Iron Condor Update.

After a nice snap-back move today in the market, notably the Russell (IWM), moved three out of the four major market indices into an overbought to very overbought state. A few more of our other proprietary indicators suggest that a short-term reprieve (1-5 days) should be expected. There is a chance that we could move slightly higher over the next day or two, but I think any rally will be quickly sold-off, at least of over the short-term. OIH is back down to oversold levels. I will keep a close eye on how OIH reacts over the next day or two because if it can cycle down into a very oversold state I might be tempted to buy some calls. OIH can move substantially over the course of one trading day so I want to be patient at this … [Read more...]

Another Successful Options Cycle – Short Iron Condor

Today's range bound trading was typical for an option expiration. Most people associate option expiration with a widely vacillating environment and historically that can't be further from the truth. The best thing about today is that it maintained our current short-term view on the market. The trading day following President's Day is overwhelmingly negative with roughly 30% of the days being positive. Moreover, the VIX is back down to 10 which in the recent past has triggered a quick sell-off. Also, don’t forget the seasonal weakness that typically occurs the day following options expiration. Combine the aforementioned conditions and I think a short-term play could be on my agenda for Tuesday. SPX settled at roughly the 1452 area … [Read more...]

Short-term bearish signals lining up

Volume was extremely slow today due to the upcoming market holiday. As a result the major indices traded in a fairly tight range. My guess is that volume should pick up tomorrow morning and taper off as the day progresses. I mentioned yesterday how the days surrounding President's Day overwhelmingly negative on a historical basis. I think this warrants some attention as the S&P, Dow, and Nasdaq 100 all sit in an overbought state. Moreover, the VIX is back down to 10 which in the recent past has triggered a quick sell-off. Also, don't forget the seasonal weakness that typically occurs the day following options expiration. It is certainly worth looking a short-term play and if we get continue to trade at this current level tomorrow or move … [Read more...]

Seasonal Bias Surrounding President’s Day

Immediately following Mr. Bernanke's optimistic statement on the health of the economy was released at 10:00 EST the market surged and never looked back. The rally brought the S&P and Dow back into an overbought state and the tech-heavy NASDAQ and Russell are fast approaching. The bounce off the oversold conditions and strong support levels on Monday proves that the bulls are still in charge, at least for the moment.   I came across an interesting seasonal statistic that involves the days surrounding President's day (five days before and after). I would never attribute a move like today's to seasonality, but I do find it interesting that the third trading day before President's day is overwhelmingly higher on average. The third day … [Read more...]