August 19, 2017

Archives for April 2007

Short-term Correction

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 … [Read more...]

No Posts Tonight! – Post on Sunday

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 … [Read more...]

New High’s and Summer Doldrums

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 … [Read more...]

The Dow (DIA) and Trading ETF Options

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 … [Read more...]

SPX Short Iron Condor and Short-Term Overbought

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". … [Read more...]

Stodgy market, Condors, and ETF Extremes

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. … [Read more...]

Another Upside Gap!

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 … [Read more...]

Strong Short-Term Seasonal Weakness Ahead

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) … [Read more...]

Short-Term Signals Reach Extremes

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 … [Read more...]

Tuesday Top?

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 … [Read more...]