Options expiration can’t come soon enough

January 16, 2008

What a day! The market gaps lower on the Intel earnings, then moves immediately higher to close the gap. Once it closes the gap it turns tail and heads for the April lows in which it (S&P 500) bounces and then proceeds to move steadily higher throughout the day to reach 1391 fifteen minutes before the start of the final hour of trading. Then, well, it collapses into the closing bell to close ht day lower at 1373. Just your typical trading day during the week of options expiration.

Not much has changed since yesterday. The market moved deeper into oversold territory, seasonal bullishness, strong support around the 1365-1370 level, the gap from 1/4 still hovering above, and several sentiment extremes that have recently entered the market.

Of course, the market has a mind of its own and can move in any direction it wishes but the signals are in place for a short-term bounce to the upside.

Stay tuned for the new Iron Condor strategies that I will be introducing next week. I will talk about them in detail in the upcoming expiration report (subscriber’s only). Furthermore, I will be introducing a few other strategies to mix over the next few months.

I appreciate all of the kind words and wonderful feedback recently. Our subscriber base continues to flourish and I hope that we can continue to bring you more of the information you seek. As always any feedback and comments are welcome and encouraged.

Overbought/Oversold for January 16, 2008

S&P (SPY) – 22.8 (oversold)

Russell 2000 (IWM) – 27.6 (oversold)

Dow (DIA) – 26.5 (oversold)

Nasdaq 100 (QQQQ) – 24.9 (oversold)

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Filed Under Crowder's Daily Market Commentary ·

Options expiration around the corner

January 15, 2008

Update on Iron Condor position:

Wow! A 2.8% loss in the S&P (SPX) today was certainly unexpected. The sharp decline has left our SPX Iron Condor only 20 points or approximately 1.5% above our short put strike. Moreover, Intel came out with earnings after the closing bell that did not please Wall Street. The negative report has pushed the futures lower so if the futures stay where they are then we should expect to see a gap lower

A gap lower would push the market further into an oversold state which typically leads to fade of the gap. If this occurs we should get a bit of reprieve coming over the next day or so. Only time will tell, but I have to admit I am pulling for the bulls this time around.

So from a technical standpoint and after further investigation I expect to see a bounce over the next day or so. Why? Well, the aforementioned of course (oversold readings, potential gap lower into already oversold readings, seasonal bullishness and a TRIN reading above 4 and strong support at the 1470 level (August lows)). The TRIN above 4 is definitely an extreme and a rarity, however, we have seen two readings above four in the last few weeks.

Tomorrow should be interesting! Watch the 1370 and 1360 levels closely.

Overbought/Oversold for January 15, 2008

S&P (SPY) – 27.0 (oversold)

Russell 2000 (IWM) – 27.1 (oversold)

Dow (DIA) – 29.5 (oversold)

Nasdaq 100 (QQQQ) – 28.5 (oversold)

Filed Under Crowder's Daily Market Commentary ·

Options Expiration Looms

January 14, 2008

All of the major indices bounced off of oversold conditions for the second time in less than a week. The question is will today’s rally gain any steam? We are nearing resistance levels once again so any upside, but a break of the near-term resistance in the S&P should bring the market back up to close the downside gap that occurred on 1/4. The same goes for the other major indices.

I have to admit that I am very excited about the future of our Iron Condor strategy. With only three days left with are 56 points or 4.1% above our short strike. If all goes well and are Iron Condor spreads expire worthless we will add another 4.9% (includes commissions) to the 25.1% since we switched over using an extra-wide range. That would make a 30% gain in since 8/28/. The market (SPY) has managed to lose -2.4% over that same time frame.

As I have stated repeatedly over the last few weeks I pan on adding a few more underlying indices to the mix. So far, the Russell 2000 (RUT) is the one certainty, but I have a few more in mind as well. My plan was to add only two new underlyings this time around.

Overbought/Oversold for January 14, 2008

S&P (SPY) – 43.8 (neutral)

Russell 2000 (IWM) – 35.3 (neutral)

Dow (DIA) – 42.4 (neutral)

Nasdaq 100 (QQQQ) – 40.9 (neutral)

Filed Under Crowder's Daily Market Commentary ·

Some breathing room for our SPX Iron Condor – Introducing new Iron Condors on 1/21

January 10, 2008

The major indices have moved back into a neutral state, although the shorter-term overbought/oversold measures like the RSI (2) are inching ever closer to an overbought state. We still have a ways to go to reach that level, but a move back up towards the 1435 area would certainly do it. We could see a reprieve over the coming days, but I still think the downside gaps from a few days ago will close before another significant move lower (if it actually happens) occurs. Just my opinion.

We are entering a period of bullish seasonality over the next five days, but as we witnessed just a few weeks ago seasonality doesn’t always pan out and should never be the sole reason to place a trade. I just want to make you aware that it is out there.

As for our SPX Iron Condor strategy we are back (at least for now) in the safety range hovering 60 points or 4.4% above our short put strike. However, as we have seen in this volatile market we could move sharply lower so we will have to stay on our toes over the next few days. If all goes well our returns since the strategy was altered on 8/28 will be close to 30%. Not bad, considering the market has moved substantially lower during that same time frame.

As you can see from our trades prior to the adjustments on 8/28 we went with tighter ranges much like other Iron Condor strategists. Yes, they can bring in big gains, but they can also lead to substantial losses. Since 8/28 we have decided to go with a extra-wide range that, in most cases, does not require adjustments and is usually stress free. Hopefully the market can hold up for a few more days or at least not move 4.4% lower so that we can experience another profitable trade.

We will be initiating our new RUT Iron Condor (much like the current SPX with extra-wide ranges) on the Monday following options expiration (1/21) so be stay tuned. We are also working diligently to bring another underlying into the Iron Condor mix making our Iron Condor strategies at three. We will follow the two in our newsletter for at least the next month or so and then we will initiate it into the auto-trade mix.

Overbought/Oversold for January 10, 2008

S&P (SPY) – 61.1 (neutral)

Russell 2000 (IWM) – 45.9 (neutral)

Dow (DIA) – 52.3 (neutral)

Nasdaq 100 (QQQQ) – 49.7 (neutral)

Filed Under Crowder's Daily Market Commentary ·

Will the bounce continue?

January 9, 2008

It was an unbelievable day for the market. After moving to the 1378 level the market bounced sharply and never looked back . It closed at 1409. Could this be the short-term bottom everyone has been awaiting. It certainly looks that way, but as we all know anything can happen. Several of the indicators we follow are pointing to a follow through, but again anything is possible. As I stated yesterday I had not seen oversold levels this extreme in quite some time. Some of the oversold indicators were near 9/11 levels which is incredibly low.

Again, the question is how far, if at all, will the bounce move to the upside? There is still the downside gap on 1/4 that is yet to be closed in the major indices (IWM, DIA, SPY, QQQQ) so I would not be surprised to see them close over the coming days. As I have stated in the past gaps of this magnitude (up or down) have a tendency to act like a magnet drawing the indices back to the levels where the gaps were initiated. If that does occur this will most likely push the market back into an overbought state, but I do not want to get ahead of myself.

The move higher gave us some much needed room in our SPX Iron Condor strategy. We are now approximately 49 points above the short put strike in our SPX Iron Condor strategy or 3.6% with 7 trading days left until the European styler options expire. The extra-wide ranges that we went to on 8/28/07 has led to a 100% win ratio for a total gain of 25.1%. If we were using our old strategy of narrower ranges, but higher premium, we would have most likely seen a loser this month, but the extra-wide range creates the ability of the underlying SPX to vacillate widely. Of course, there are still 7 days left and as we all know 7 days is a long time in this highly volatile market.

The market is up after hours, mostly on Alcoa’s earnings (yes earnings season has officially begun). Also, Bernanke speaks tomorrow which could have the potential to move the market.

Overbought/Oversold for January 9, 2008

S&P (SPY) – 28.2 (oversold)

Russell 2000 (IWM) – 23.0 (oversold)

Dow (DIA) – 25.6 (oversold)

Nasdaq 100 (QQQQ) – 31.5 (neutral)

Filed Under Crowder's Daily Market Commentary ·

Market moves deeper into oversold territory.

January 8, 2008

Nine straight days of lower closes in the underlying SPX (S&P 500). The market has managed to move lower every day since we initiated our SPX Iron Condor trade back on 12/27. The decline since 12/27 (eight trading sessions) in the S&P (SPX) is 6.8% as of the close today. Even with the sharp sell-off we are still roughly 30 points above our short put strike or 2.2% with eight more days until SPX expires (European style option).

Extreme oversold levels are still pointing towards a short-term bounce, but they have so for several days. As we move further and further into oversold levels the probability of a short-term bounce increases. However, the 200-day moving average for the S&P is about to turn lower which often means that we are in or near a bear market. If the S&P is able to move lower and break the 1375 level (March 2007 lows) we could see steady selling over the intermediate-term, but as we ll know markets never move in one direction. A short-term bounce is ever closer. The question is how far and for how long? A push back up to 1435 would not be a surprise and don’t forget the downside gap that is lingering above which is could also help extend the bounce. On the other hand, we have yet to see the wash out scenario (although maybe today qualified depending on the reaction tomorrow) that is typically associated with a bottom. Could we see more declines over the coming days, certainly, anything is possible, but as I stated before the probability of a short-term bounce has increased dramatically over the last few trading sessions. Only time will tell.

Overbought/Oversold for January 8, 2008

S&P (SPY) – 9.5 (very oversold)

Russell 2000 (IWM) – 11.9 (very oversold)

Dow (DIA) – 9.1 (very oversold)

Nasdaq 100 (QQQQ) – 10.4 (very oversold)

Filed Under Crowder's Daily Market Commentary ·

Market Remains in Oversold State

January 7, 2008

The market vacillated wildy today and ended the day with mixed results. Many of the indicators that we mentioned last Friday are still pointing to a short-term bounce, but as we all know there are no guarantees. Our main level of concern at this juncture is the 1360 level on the S&P. We are still approximately 56 points or roughly 4% above the short put strike and as we have seen declines can come fast and hard. A short-term bounce should give us some extra breathing room, plus it might afford us the opportunity to get out with a small gain in case we want to take some profits off the table and move on to next month. As I always say this is a marathon and not a sprint. As always we will keep you (our paid subscribers) informed of any decision (in real-time) that we make on this subject.

Sorry so short tonight. I am still searching for the best candidates to use for our current (as of 8/28) Iron Condor strategy. As I mentioned I will be defintely be using the Russell 2000 (RUT), but I would like to introduce another underlying to the mix as well. I can’t wait to get started!

Have a great night!

Overbought/Oversold for January 7, 2008

S&P (SPY) – 14.1 (very oversold)

Russell 2000 (IWM) – 18.6 (very oversold)

Dow (DIA) – 14.1 (very oversold)

Nasdaq 100 (QQQQ) - 15.1 (very oversold)

Filed Under Crowder's Daily Market Commentary ·

Major Indices at Extreme Oversold Levels

January 4, 2008

The magnitude of the selling this past week surprised many, including myself. Thank goodness for using extra wide ranges in our SPX Iron Condor and the selective nature of the ETF Extremes. Is it possible that we will see a signal in the ETF early next week? The market officially entered an extreme state on Friday so Monday could be interesting. I have been patiently sitting on my hands for months waiting for a signal so I certainly hope a signal is in the cards for early next week.

Bullish seasonality? What bullish seasonality. So much for the second and third trading days being historically bullish. As I always say, I never trade on seasonality alone. I like to use it an added tool when the indices I follow reach extreme levels. Now that all four of the major indices we follow are in an extreme (very oversold) state the probability of a short-term reprieve looks favorable on a probability basis.

The gap lower today in the S&P (SPX) never closed today as the market tumbled lower throughout the day. Large gaps lower in the major indices such as the S&P (SPX), often lead to a fade of the gap over the short-term (1-5 days). Couple the large gap lower with the current extreme oversold levels and there could be an argument made for a short-term bounce early next week.

Note of Interest:

I also went back to see how the market (S&P) reacted after a weak start to the year. As it turns out the market responded favorably after a weak first three days of trading with an average return of 2% for the remainder of January.

Overbought/Oversold for January 2, 2007

S&P (SPY) – 14.4 (very oversold)

Russell 2000 (IWM) – 15.8 (very oversold)

Dow (DIA) – 14.4 (very oversold)

Nasdaq 100 (QQQQ) - 16.1 (very oversold)

Filed Under Crowder's Daily Market Commentary ·

Seasonal Let Down – Short-term Bounce Still In the Cards?

January 3, 2008

Yesterday I mentioned the overwhelmingly bullish seasonal tendency that typically occurs on the second trading day of the year. Well, we didn’t exactly get that today. While the Dow and QQQQ finished the day slightly above water the S&P and Russell 2000 finished the day flat to lower. History did not not exactly repeat itself today. That being said, three out of the four major indices are in an oversold state with the Russell being the most recent participant. As I said yesterday, this typically precedes a short-term reprieve or bounce. Moreover, the RSI (2) a short-term overbought/oversold measure is currently reading 2.1. This is an extremely low reading and one that also typically precedes a short-term move higher. Of course, as I always say there are no certainties in trading and have an exit strategy with each and every trade.

Our SPX Iron Condor for the January options expiration cycle is currently situated towards the middle of our chosen range with 15 trading days left. If all goes well, this will be our fifth successful trade in a row and a perfect five out of five since we established new rules for our SPX Iron Condor strategy back on 8/28.

As I have stated several times over the past week I will be adding at least one, maybe two new underlyings (RUT and ???) using the new trading guidelines used by our Iron Condor strategy. Most likely I will follow them in the blog and in more detail in the newsletter (subcriber’s only) for a few months before I make them available for auto-trade. Of course, things could change. We feel very comfortable with the strategy and with the addition of important position-sizing techniques (will be discussed in upcoming newsletter) the future of our Iron Condor strategy looks bright. The goal is to minimize the large draw downs that we witnessed earlier in the year (when we were using our old strategy, tighter ranges to gain more premium) and with our new strategy (wide ranges taking in a smaller premium, higher win ratio) coupled with proper position sizing techniques we hope to alleviate the aforementioned. As I always say this is a marathon and not a sprint. Patience is key and only time will tell.

Overbought/Oversold for January 2, 2007

S&P (SPY) – 28.7 (oversold)

Russell 2000 (IWM) – 25.6 (neutral)

Dow (DIA) – 25.0 (oversold)

Nasdaq 100 (QQQQ) – 35.2 (neutral)

Filed Under Crowder's Daily Market Commentary ·

Short-term Bounce?

January 2, 2008

Happy New Year! I hope all of you had a wonderful holiday season. After some much needed rest I am back and ready for a prosperous 2008/ Our service will be implementing quite a few additions to the service this year so stay tuned.

On the first trading day of the year the market decided to move decisively lower on a lower than expected ISM number of 47.7%. Analysts predicted a reading of 50.5%. A reading below 50% indicates economic contraction which is why the reaction to the report was so fierce.

Anyway, I try not to pay too much attention to the so-called noise.I allow the noise to move the market into extreme levels and then I begin to pay attention.

The move lower today pushed two out the four major indices we follow into oversold territory. The other two indices are bordering on oversold levels. Typically, when all four major indices reach this type of extreme we will witness a short-term reprieve (1-5 days) in the market. The S&P is now trading at December lows and what seems to be some decent support.

Tomorrow brings some bullish seasonality. The second trading day of the year is the single most bullish day of the year with an average return of 0.5% with 74% of all the days closing in positive territory.

Couple the technically oversold levels, S&P sitting on support, and some extremely bullish seasonal winds blowing in tomorrow and the probability of a short-term bounce certainly increases over the short-term.

As I stated in the last Expiration report I will be adding a few new strategies to the mix over the coming weeks. Stay tuned!

Have a great night!

Overbought/Oversold for January 2, 2007

S&P (SPY) - 28.8 (oversold)

Russell 2000 (IWM) - 31.2 (neutral)

Dow (DIA) - 22.9 (oversold)

Nasdaq 100 (QQQQ) - 30.2 (neutral)

Filed Under Crowder's Daily Market Commentary ·

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