What to Expect Going Forward

November 30, 2007

Another gap up today, which was closed late in the session. After the gap closed the indices held steady until the last ten minutes of the trading session which was most likely due to some end of the month manuevering by the institutions.

Overhead resistance is very strong at the 1490 level on the S&P. My guess is given the overbought levels in the major indices plus a few of the major sectors will lead to a decline early next week, but as we all know nothing is certain.

As all of you know I typically deal with the short-term (1-5 days) and given what I stated yesterday I am still expecting to see the market move lower over that timeframe with a possible retest of the 1440 area. I would not be surprised at all to see the market vacillate around in a range until the December 11 Fed meeting, that is unless the Fedsurpries the market with an early rate cut.

After the short-term reprieve (if there is one) I think we could move higher into the New Year. My post several days ago that touched on bearish November lead to Bullish Decembers is the main reason. Of course, we will have to see how the market reacts going forward, but it is hard to deny the stats and the seasonal conditions lean heavily towards the bearish camp.

It would also not surprise me to see the indices finish higher on Monday, possibly testing the highs set in today. Again, as long as the S&P is unable to move through the 1490 level and sustain itself there, I still think we will see a move lower next week.

I will have more to say on this matter Sunday. Have a great weekend and Go Ducks. Believe me with all of our misfortunes at the end of the year we could use a little luck.

Overbought/Oversold for November 30, 2007

S&P (SPY) - 68.5 (neutral)

Russell 2000 (IWM) - 59.1 (neutral)

Dow (DIA) - 70.8 (overbought)

Nasdaq 100 (QQQQ) - 61.7 (neutral)

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Filed Under Crowder's Daily Market Commentary ·

Reasons for a short-term reprieve?

November 29, 2007

The market held steady today to the delight of the bulls. However, there are a few bearish short-term indicators that are presently facing the markets.

The indices we follow (as seen below) are nearing an overbought state which often leads to a short-term reprieve.
Tomorrow (11/30), according to the Stock Trader’s Almanac is historically bearish with the S&P finishing in postive territory only 33.3% of the time.
The gap higher in all of the major indices could potentially weigh, at least over the short-term, heavily on the market particularly when combined with the aforementioned.
The Russell 2000 (IWM) seems to be struggling with strong overhead resistance at the $77.00 area.
Volume on the recent rally showed little conviction among the institutional buyers.
Did we see a lower high today - Tim Knight displays what this could mean for the market ahead

Yes, over the short-term I am leaning towards the bearish camp, but I can’t deny the recent post I wrote, Bearish November leads to Bullish December. Every negative November over the last 30 years has been followed by a postive December. Check out the stats.

Our Iron Condor position once again looks very good this month even with the recent volatility. Since we altered the strategy we have yet to see a loss and have made a cumulative return of over 25% in the last three months. This month our range allows for a move in the S&P of over 10% to the upside or downside before our position is in jeopardy of taking a loss. Best of all, even with the incredibly wide range we will still make 7.9% if the underlying SPX expires between our short strikes of 1290 - 1590. There is no doubt we have had a few rough months this year in the strategy, but with the new guidelines and strict position sizing techniques the probability of success over the long-term (and as everyone knows Iron Condors are long-term strategies) has increased dramatically. Check out our recent positon. If you agree give us a try. Spots are limited so sign-up while they are available. If you do not join in time , don’t worry, we will add you to our waiting list.

Overbought/Oversold for November 29, 2007

S&P (SPY) - 62.8 (neutral)

Russell 2000 (IWM) - 56.3 (neutral)

Dow (DIA) - 66.5 (neutral)

Nasdaq 100 (QQQQ) - 68.8 (neutral)

Filed Under Crowder's Daily Market Commentary ·

Rally leads to short-term overbought levels

November 28, 2007

The market rallied hard today off the recent oversold levels. That might be putting it mildly, as the day closed with the 3rd largest percentage advance in roughly four years. Moreover, it was the first two day rally in over a month. Now the market is once again nearing an overbought state and typically in a bear market (if we are indeed in the early stages of one) overbought levels are quickly sold off.

Many of the indices are back at strong levels of overhead resistance which means we could get a short-term reprieve over the short-term.

One thing is for certain the market has moved off of the extreme levels that were in place at the close Monday. Now the real battle begins between the bulls and bears.

Again, I expect to see a downdraft in the market over the short-term, but given the postive seasonal bias that exists in December the next pullback could be an opportunity for me to take a close look at some short-term to intermediate-term long positions.

Before I get too aggressive I want to see how the market reacts to another pullback. IF we drop right back down to the levels seen Monday then I would have second thoughts about the possiblity of a so-called Santa Claus rally. As I stated yesterday bearish Novembers lead to bullish Decembers so the historical precedents are in place, but as we all know in the world of trading nothing is certain.

According to the Stock Trader’s Almanac tomorrow is seasonally bullish, but then the seasonal sentiment changes back to bearish on Friday with the S&P closing lower 67.7% of the time.

Overbought/Oversold for November 28, 2007

S&P (SPY) - 62.6 (neutral)

Russell 2000 (IWM) - 61.1 (neutral)

Dow (DIA) - 65.2 (neutral)

Nasdaq 100 (QQQQ) - 66.9 (neutral)

Filed Under Crowder's Daily Market Commentary ·

Bearish November Leads to Bullish December

November 27, 2007

Do you believe the Dow Theory? I have to admit all of the recent negativity has me leaning towards the bullish side, at least for the short-term. The short-term indicators I follow, again short-term, are overwhelmingly bullish; however bullish indicators don’t amount to much if buyers are not willing to step in.

I really don’t care too much about the longer-term picture as I am not that type of trader. I try to decipher what the market has laid in front of me and from my seat it looks like a bottoming process is in the making. Of course, I could be completely wrong, believe me it has happened more than once, but I have to go with what has gotten me this far as a trader. If I am wrong I allow my risk management techniques to take over. Anyway, when I look at the oversold levels over several time frames it certainly looks as though a bottom is near.

Furthermore, high volatility is generally witnessed during market bottoms. Adam Hamilton has a few interesting insights about SPX Volatility Extinctions.

There is no doubt that the market is officially in a correction, but is there more to come. TickerSense gives us a few insights on the scenario.

I also went back 30 years to see how December typically reacts after a bearish November just to see if anything stuck out. Interestingly enough I found that over the last 30 years there have been 8 bearish Novembers and not one of those occurences was followed by a lower December.

November Decline December Reaction

1976 -0.8% +5.2%
1984 -1.5% +2.2%
1987 -8.5% +7.3%
1988 -1.9% +1.5%
1991 -4.4% +11.2%
1993 -1.3% +1.0%
1994 -3.9% +1.3%
2000 -8.0% +0.4%
2007 -7.6% (so far) ????

December has also been higher 24 out of the last 30 years, the most of any month.

It will certainly be interesting to see how December pans out.

As I said before the longer-term picture really doesn’t matter too much to me. I only care about expiration cycle to expiration cycle. As I stated yesterday, we established a 300 point range on our current SPX Iron Condor position which basically means that the S&P can move slightly over 10% up or down over the next 23 days before our trade is in jeopardy of taking a loss. Since we established our new trading guidelines using probability as our chief guidelines rather than being greedy and seeing how much premium we can take in each expiratiomn cycle. The new guidlines have led to 25.1% cumulative gains over the last three months and if all goes well this month, our neutral position (300 point range) will make 7.9%. Remember, the more premium that you bring the less probability of success for that particular position. We are completely satisfied taking a 7.9% gain over four weeks with a trade that has over an 83% chance of success.

As always please do not hesitate to email us with any questions that you might have. We encourage it!

Overbought/Oversold for November 27, 2007

S&P (SPY) - 42.0 (neutral)

Russell 2000 (IWM) - 39.7 (oversold)

Dow (DIA) - 46.6 (neutral)

Nasdaq 100 (QQQQ) - 50.0 (neutral)

Filed Under Crowder's Daily Market Commentary ·

SPX Iron Condor

November 26, 2007

Please click the following link to access the SPX Iron Condor summary.

SPX Iron Condor Trade for the December 2007 Expiration Cycle The increase in volatility has not phased the SPX Iron Condor strategy. The strategy made 7.9% over the last four week expiration cycle and 25.1% since we initiated our new guidelines for the strategy. Essentially, the way we trade Iron Condors has changed dramatically since our last loss in August. We allow probability to work for us. Let me explain.

The win ratio for the strategy has been good. The strategy has had 9 out of 12 successful trades for a win ratio of 75%. However, two out the three losses have exceeded 50% which has led to cumulative losses in the strategy over the past twelve months.

We basically implemented a new SPX Iron Condor strategy on 8/28/07. The new strategy entailed using the power of probability as the chief guideline. We now aim for ranges that have a probability of success that exceed 80% and often 86%. This allows the strategy to use a large range for the underlying S&P (SPX) to move up or down within a four week cycle. For example, over the past three expiration cycles we have used a range of 240 and 260. This month we were able to use a 300 point range. A range of 240, 260 and 300 points allows for the underlying SPX to move roughly 8.6% - 10.4% up or down (obviously depending on the range) before the strategy is in jeopardy of taking a loss. That’s a total range of between 17% - 20% (again, depending on the range) for the underlying SPX to move vacillate around in.

By choosing a higher probability trade, the strategy gains the comfort of using a very wide range. This makes for more successful trades (a higher win ratio) and less adjustments.

The downside is that we will receive less premium than if we chose to go with a tighter range. Furthermore, the losses, when they occur are typically larger as more money is at risk. However, we have several ways to combat and effectively manage the risks and losses when they occur because like all strategies, losses are inevitable.

Implementing strict position sizing is the only effective way, in our opinion, to combat the losses that will inevitably occur in the strategy. This is typically the case for most strategies, but for Iron Condors it is in our opinion, mandatory.

If you have any questions or comments, please do not hesitate to email us at support@crowderinvestments.com.

Overbought/Oversold for November 26, 2007

S&P (SPY) - 31.3 (neutral)

Russell 2000 (IWM) - 29.3 (oversold)

Dow (DIA) - 31.2 (neutral)

Nasdaq 100 (QQQQ) - 32.2 (neutral)

Filed Under Crowder's Daily Market Commentary ·

The Week After Turkey and the Iron Condor

November 23, 2007

According to the Stock Trader’s Almanac, November 26-29 are seasonally bullish with the S&P finishing higher Monday (66.7%), Tuesday (81.0%), Wednesday (61.9%) and Thursday (71.4%).

We shall see soon enough. As you all know, I never base a trade solely on seasonal tendencies. However, I am always aware of the seasonal calendar as an additional tool for potential trade set ups that I am contemplating.

I will add the anticipated SPX Iron Condor position for the December cycle over the weekend. I will try and establish the position early next week. So far our new way of trading Iron Condors has worked wonderfully. Again, we will allow probability to work for us. With the VIX so high we should be able to establish another huge range for the underlying SPX to vacillate in over the next four weeks.

Daily Links of Interest

Black Friday correlate to future gains or losses? Bespoke has the answer.
Adam has a note on volatility.

I hope all of you have a wonderful weekend!

Overbought/Oversold for November 23, 2007

S&P (SPY) - 44.1 (neutral)

Russell 2000 (IWM) - 42.0 (neutral)

Dow (DIA) - 40.1 (neutral)

Nasdaq 100 (QQQQ) - 43.0 (neutral)

Filed Under Crowder's Daily Market Commentary ·

Seasonal Tendencies and Next Week

November 21, 2007

The positive seasonality that typically occurs around Thanksgiving has yet to rear its head. I reported earlier this week about the bullishness that precedes and follows Turkey day. We still have Friday, but given the shortened trading day on Friday my guess is that gains, if any, would be limited. The day before and after the holiday combined, only experienced 9 losses in 54 years. The market would have to rally sharply Friday if the market has any chance of increasing the overall winning trades that typically surround the holiday.

With the exception of the Nasdaq 100 (QQQQ), all of the major indices we follow are back in an oversold state. Moreover, several of the indices, particularly the Russell 2000 (IWM), are sitting on key support levels. Oh yeah and one more thing, next week brings an overwhelming amount of seasonal bullishness.

According to the Stock Trader’s Almanac, November 26-29 are seasonally bullish with the S&P finishing higher Monday (66.7%), Tuesday (81.0%), Wednesday (61.9%) and Thursday (71.4%).

Combine all of the scenarios above and the probability of a short-term bounce (1-3 days) increases dramatically. Of course, we must remember there are no guarantees in trading, all we can count on are probabilties.

Have a wonderful Thanksgiving!

Overbought/Oversold for November 21, 2007

S&P (SPY) - 25.3 (oversold)

Russell 2000 (IWM) - 21.2 (oversold)

Dow (DIA) - 23.3 (oversold)

Nasdaq 100 (QQQQ) - 31.7 (neutral)

Filed Under Crowder's Daily Market Commentary ·

Expiration Report On Insider’s Page

November 20, 2007

The November Expiration Report (only available to paid subscribers) is now accessible on the Insider’s page.

I will be back with a sohrt post intraday tomorrow and after the closing bell. Stay tuned!

Overbought/Oversold for November 20, 2007

S&P (SPY) - 37.6 (neutral)

Russell 2000 (IWM) - 29.3 (oversold)

Dow (DIA) - 35.8 (neutral)

Nasdaq 100 (QQQQ) - 38.5 (neutral)

Filed Under Crowder's Daily Market Commentary ·

Turkey Day Rally?

November 19, 2007

Three out of the four major benchmarks that I follow are back in an oversold state. Moreover, the market has officially moved into a positive seasonal bias over the short-term.

Last week I stated,

…historically the market performs very well the day before and the day after the holiday. The Stock Trader’s Almanac states, “long into weakness prior, exit into strength after”.

They go on to state:

“for 35 years the combination of the Wednesday before Thanksgiving and the Friday after had a great track record, except for two occasions. Since 1988, Wednesday-Friday lost six of eighteen times with a total Dow point-gain of 502.41 versus a Wednesday-Monday total Dow point-gain of 704.77 with only four losses. The best strategy seems to be coming into the week long and exiting into strength Friday or Monday.”

Given the oversold conditions and seasonal tendencies that exist I will be paying close attention over the few trading sessions. Volume will continue to lighten up as we approach the holiday, but this often allows for sharp moves. It will be interesting to see if the market experiences the another Turkey rally over the coming days. Have a great night!

Overbought/Oversold for November 19, 2007

S&P (SPY) - 29.4 (oversold)

Russell 2000 (IWM) - 24.1 (oversold)

Dow (DIA) - 26.4 (oversold)

Nasdaq 100 (QQQQ) - 34.7 (neutral)

Filed Under Crowder's Daily Market Commentary ·

Note to Subscribers

November 18, 2007

I just wanted to let everyone know that the November Expiration report will be out this Tuesday. The SPX IRon Condor will not have a position added next week since the December Expiration Cycle is five weeks and we typically only go out a max of four weeks.

Thanks,

Andrew

Filed Under Crowder's Daily Market Commentary ·