Short-term Correction
April 30, 2007
First I would like to apologize for my lack of posts on Friday and moreover for my expected post on Sunday.
The market traded in a fairly tight range today until around 2:00 EST, when the anticipated short-term correction occurred. Once the overbought conditions gave way the selling was fierce. This is typical when we see a market this overbought. The question is how will it last? Over the past few months any dip was quickly propped back up by the bulls. Could this time be different?
The S&P (SPY) and Nasdaq 100 (QQQQ) are back in a neutral state other than the Russell (IWM) which reached oversold status and the Dow (DIA) still sits in an overbought state. The small-caps have been the weakest among the major benchmarks during the latest trend move. I think this could be an early indication of what is to come. As I said last week the market is nearing the “Sell in May and Go Away” phase. Yes, the summer doldrums are near and what we typically see is a range-bound market. After the gains we have seen I would not be surprised to see this type of situation occur.
The pullback has helped our current condor position as the SPX now sits right in the middle of our 135 point range. If all goes well we should make close to a 7% profit at options expiration.
My guess is that we could see a follow-through on today’s decline, but it should not last too long. I think the market will trade in a range until Friday’s unemployment numbers are released.
Overbought/Oversold levels for April 30, 2007
- SPY - 50.4 (neutral)
- DIA - 72.1 (overbought)
- IWM - 29.2 (oversold)
- QQQQ - 54.9 (neutral)
- GLD - 40.7 (neutral)
- OIH - 80.9 (very overbought)
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 2 stock option strategies and one stock-based strategy in our investment newsletter. All of our strategies use the major benchmarks as the underlying. Furthermore, you will receive two free months of our investment newsletter when you purchase our White Paper. Check it out!
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No Posts Tonight! - Post on Sunday
April 27, 2007
I am traveling to NYC so there will not be a post tonight. However, I will be back on Sunday and will have all of the overbought/oversold conditions plus much more at that time.
Have a great weekend!
Andrew
New High’s and Summer Doldrums
April 26, 2007
It is almost an understatement to say that the market has been relentless with the Dow (DIA) up 16 out of the last 18 trading sessions. Some of our shorter-term proprietary indicators are nearing extremes which could mean a signal as early as the beginning of next week in our ETF Extremes strategy. Although, it might take until the latter part of next week if seasonal tendencies (bullish end/beginning of month) hold true.
I do think any short-term gains will be limited until the market experiences a short-term reprieve. It is quite possible to see the 4/20 gap close before we get another extended move upwards. Furthermore, the market is nearing the “Sell in May and Go Away” phase. Yes, the summer doldrums are near and what we typically see is a range-bound market. After the gains we have seen I would not be surprised to see this type of situation occur. If it does it will certainly bode well for our SPX Short IRon Condor Strategy and the ETF Extremes as well.
Overbought/Oversold levels for April 26, 2007
- SPY - 87.0 (very overbought)
- DIA - 91.1 (very overbought)
- IWM - 79.8 (overbought)
- QQQQ - 92.8 (very overbought)
- GLD - 33.7 (neutral)
- OIH - 80.9 (very overbought)
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 2 stock option strategies and one stock-based strategy in our investment newsletter. All of our strategies use the major benchmarks as the underlying. Furthermore, you will receive two free months of our investment newsletter when you purchase our White Paper. Check it out!
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The Dow (DIA) and Trading ETF Options
April 25, 2007
Wow! April is certainly keeping up with its historical precedents as the best performing month for the Dow since 1950. The Dow (DIA) opened up the month at $123.66 and is now trading for $130.62 up 5.6% for the month with three trading days left. The average gain for April is 1.8% with pre-election years significantly higher at 4.2%. The bullish move has pushed the major indice into record territory. Does anyone even remember Feb.27? The bulls short-term memory has managed to reap rewards for those long the market and those short, well, lets say they have had quite a few sleepless nights recently. Which brings us to our ETF Extremes strategy.
Our shorter-term proprietary indicators have managed to keep us out of this quickly rising market even though our overbought/oversold indicators (below) have recently spent quite a few days in overbought to very overbought territory. Our indicators have kept us out of similar situations in the past. This gives us the confidence and needed patience to effectively trade this strategy.
Overbought/Oversold levels for April 25, 2007
- SPY - 86.2 (very overbought)
- DIA - 89.2 (very overbought)
- IWM - 70.8 (overbought)
- QQQQ - 91.2 (very overbought)
- GLD - 51.0 (neutral)
- OIH - 78.3 (overbought)
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 2 stock option strategies and one stock-based strategy in our investment newsletter. All of our strategies use the major benchmarks as the underlying. Furthermore, you will receive two free months of our investment newsletter when you purchase our White Paper. Check it out!
Watch and learn how we implement our strategies.
Have a great night!
www.crowderinvestments.com
SPX Short Iron Condor and Short-Term Overbought
April 24, 2007
The market continued to consolidate today as the major averages held steady. We should see a break out of the short-term range over the next few sessions. My guess would be to the downside, but given the strong nature of the bullish camp I would tread lightly with any short positions.
As for our SPX Short Iron Condor strategy, we were able to establish a position for the May expiration cycle that would allow us a 6.8% gain over the next four weeks as long as the underlying SPX settles between 1415 and 1550. A neutral-based strategy with long-term potential. But, as we saw last month, capital preservation and asset allocation are key factors when implementing this strategy. As the old adage goes “never put your eggs in one basket”.
Subscribers can check out our full position and trade summary on the Insider’s page of the site under Condor trades.
Overbought/Oversold levels for April 24, 2007
- SPY - 76.9 (overbought)
- DIA - 83.6 (very overbought)
- IWM - 66.2 (neutral)
- QQQQ - 84.4 (very overbought)
- GLD - 47.6 (neutral)
- OIH - 53.7 (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 2 stock option strategies and one stock-based strategy in our investment newsletter. All of our strategies use the major benchmarks as the underlying. Furthermore, you will receive two free months of our investment newsletter when you purchase our White Paper. Check it out!
Watch and learn how we implement our strategies.
Have a great night!
www.crowderinvestments.com
Stodgy market, Condors, and ETF Extremes
April 23, 2007
Due to the stodgy nature of the market today we were unable to receive the $.70 premium in our SPX Short Iron Condor strategy. A decent directional move over the next day or two should allow us to receive the anticipated premium in the position that mentioned in the last weekend’s April Expiration report.
Remember, this a four week cycle and the VIX is hovering around 13. At the open on 3/19 (the beginning of last month’s expiration cycle) it was in the high 15’s. What does this mean? Lower option premiums for the cycle. Although, even with lower premium expectations a monthly return of $.70 (per contract) or 6.8% (includes typical options commission schedule) is still well-within the range of our monthly performance goals.
follows. Following excerpts from April Expiration report.
By staying diligent and sticking with our guidelines the ETF Extremes strategy has a cumulative win ratio of 92.3% (12 out of 13 trades) since our first trade a little over a year ago. Our total return since we initiated the strategy is 45.3% (if compounded monthly over 200% - read below). Furthermore, we have been exposed to the market less than 15% of all trading days.
Many of you have written in about the performance of the strategy and why we choose to use a standard 10 contracts with each trade. Position sizing is arguably the most important aspect of successful trading and cannot be emphasized enough. Over the next few weeks we will be sending out several articles (members only) about position sizing and how it applies to our strategies.
The sample portfolio is currently worth $7,265 or 45.3% (including commissions) since its inception (1/06). The win ratio in the strategy currently stands at 92.3%, 12 out of 13, (check out the Performance page on our site for further details). Based on 10 contracts per trade.
If we took the initial $5,000 and invested the entire compounded amount with each trade our initial investment would have an overall return that exceeds 200%. The return is far greater than using a fixed number of contracts, but the volatility is greater when using a percentage-based system. Furthermore, a percentage-based system typically has greater risk associated with it, particularly when 100% is allocated. Remember, no matter how good a system, strategy, stock, mutual fund or any type of investment for that matter, never put all of your eggs in one basket. Diversify, diversify, diversify!
Obviously we are pleased with the win ratio, but we are realists. We realize there is no holy grail in trading. One thing we do know for certain is that we have found a rare, unique, and concrete opportunity that makes the world of sense to us and we trade it to hopefully make money over the long-term. Furthermore, we realize that the less we trade, the better the strategy will do in the long run. And the long run is what matters. This is what makes our ETF Extremes 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.”
Again, patience is the key. As Todd Harrison 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.
We will continue to patiently wait for opportunities to arise and only trade scenarios where the probability is overwhelmingly on our side. Couple this approach with sound risk management and you can see why we have been able to beat the major benchmarks by a substantial margin.
Overbought/Oversold levels for April 23, 2007
- SPY - 76.3 (overbought)
- DIA - 81.0 (very overbought)
- IWM - 64.8 (neutral)
- QQQQ - 79.6 (overbought)
- GLD - 58.2 (neutral)
- OIH - 51.2 (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 2 stock option strategies and one stock-based strategy in our investment newsletter. All of our strategies use the major benchmarks as the underlying. Furthermore, you will receive two free months of our investment newsletter when you purchase our White Paper. Check it out!
Watch and learn how we implement our strategies.
Have a great night!
www.crowderinvestments.com
Another Upside Gap!
April 20, 2007
Another upside gap occurred today and similar to the last one it finished the day unclosed. What is so surprising about the unclosed gap today is that it came in the face of “very overbought” conditions. All of our indicators have now reached an extreme territory.
Could the gap today an exhaustion gap? One last ditch effort to move the market higher before the market moves in the summer doldrums. The seasonal “sell in May and go away” is right around the corner and, as expected, May is historically one of the weaker performing months. It is something to consider over the intermediate-term in this already overextended market.
Over the short-term (1-5 days) I would expect to see the market close at least one of the gaps. Yes, I know, I sound like a broken record. But, unclosed gaps that finish near the highs of the day with little pullback intra-day are rare. Especially when they occur over the course of such a small time frame, at new YTD highs while in a ”very overbought” condition. Rare indeed.
Furthermore, given the strong bearish tendencies of trading days that follow option expiration I think the probability of a short-term move can’t be better. As for how steep the move, who knows. Every attempt at a correction has been quickly bought. The bulls have been relentless. So be nimble and never let a profit turn into a loss.
Overbought/Oversold levels for April 20, 2007
- SPY - 93.3 (very overbought)
- DIA - 93.6 (very overbought)
- IWM - 67.7 (neutral)
- QQQQ - 77.9 (overbought)
- GLD - 68.4 (neutral)
- OIH - 48.3 (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 2 stock option strategies and one stock-based strategy in our investment newsletter. All of our strategies use ETFs as the underlying. Check it out! Also, you will receive two free months of our investment newsletter when you purchase our White Paper.
Watch and learn how we implement our strategies.
Have a great night!
www.crowderinvestments.com
Strong Short-Term Seasonal Weakness Ahead
April 19, 2007
The market held steady as it enters options expiration tomorrow. Options expiration tends to display a slow and steady trend to the upside. However, the trading day following options expiration is historically very weak so if the market is able to hold up tomorrow we could get a signal in the ETF Extremes as we move into the weekend. As I have stated over the past few days, given the recent action and the “very overbought” state of the market the probability of a short-term move lower remains. Watch closely to see how the market ends the day.
Overbought/Oversold levels for April 19, 2007
- SPY - 88.1 (very overbought)
- DIA - 89.0 (very overbought)
- IWM - 50.9 (neutral)
- QQQQ - 71.2 (overbought)
- GLD - 49.8 (neutral)
- OIH - 37.7 (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 2 stock option strategies and one stock-based strategy in our investment newsletter. All of our strategies use ETFs as the underlying. Check it out! Also, you will receive two free months of our investment newsletter when you purchase our White Paper.
Watch and learn how we implement our strategies.
Have a great night!
www.crowderinvestments.com
Short-Term Signals Reach Extremes
April 18, 2007
Our Tuesday top question was quickly answered today as the S&P and Dow continued the push to new highs. The Dow has been higher 13 out of the last 14 sessions and the S&P 9 out of 10. Both have been in “very overbought” territory for several days and our shortest-term proprietary indicators have reached an extreme.
Furthermore, a divergence among the major indices is signaling what could be a short-term top. The higher-beta Russell (IWM) and Nasdaq 100 (QQQQ) have struggled since the gap up Monday and have moved back into a neutral state. This is often a very good short-term indicator, particularly when the market is this overbought, that a short-term decline is not far off.
The most amazing aspect of the recent sharp move higher is it ability to push through several key overhead resistance levels without much hesitation. The move through the correction from 2/27 occurred with ease. The 1460 area of SPX -no pause. Lastly, the push through prior highs without a fight. Typically, the market will pause for consolidation at one of these levels and correct slightly but not this time. This has led to one of the best performing months in quite some time. April is on pace for the strongest performing month since November 2005 when the market gained 5.36% for the contract month.
Futures are down again after hours, but more important is the strong sell-off that occurred during the last half hour of the trading day. This could be the beginning of the short-term correction that we have anticipated since the gap up Monday. This could help out our Iron Condor strategy tremendously. At this point I will be happy with anything other than a max loss on the trade. Another reason why position sizing is so important and something that I will be discussing in detail in our next newsletter report (subscribers only). I would not be surprised to see the gap close by the close next Monday. The trading day after options expiration is notoriously weak especially if the current conditions hold.
Overbought/Oversold levels for April 18, 2007
- SPY - 88.9 (very overbought)
- DIA - 87.8 (very overbought)
- IWM - 61.1 (neutral)
- QQQQ - 66.8 (neutral)
- GLD - 74.9 (overbought)
- OIH - 48.8 (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 2 stock option strategies and one stock-based strategy in our investment newsletter. All of our strategies use ETFs as the underlying. Check it out! Also, you will receive two free months of our investment newsletter when you purchase our White Paper.
Watch and learn how we implement our strategies.
Have a great night!
www.crowderinvestments.com
Tuesday Top?
April 17, 2007
Three out of the four major indices pushed slightly higher again today. Over the last four trading days the S&P (SPX) has moved roughly forty points and all three averages have been higher approximately 3.5% on average since the beginning of April. However, seasonal conditions call for a slowdown in performance as April tends to display weakness following the tax deadline. Given the current “overbought” to “very overbought” nature of the market I would expect to see some of this weakness very soon (1-3 days). If the market is able to hold up until Friday I would expect to see another signal in the ETF Extremes.
As I write this the futures are down roughly three points so the move back to 1460 area could occur tomorrow. There are still two unclosed gaps in the S&P and I would expect to see the most recent close within the next week or so.
Overbought/Oversold levels for April 17, 2007
- SPY - 88.9 (very overbought)
- DIA - 86.6 (very overbought)
- IWM - 78.7 (overbought)
- QQQQ - 77.1 (overbought)
- GLD - 70.0 (overbought)
- OIH - 65.7 (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 2 stock option strategies and one stock-based strategy in our investment newsletter. All of our strategies use ETFs as the underlying. Check it out! Also, you will receive two free months of our investment newsletter when you purchase our White Paper.
Watch and learn how we implement our strategies.
Have a great night!
www.crowderinvestments.com
