Overbought As Important Economic Data Nears

May 2, 2008

The market surged today and has pushed the market stalwarts that make up the Dow and S&P into an “overbought” to “very overbought” state. Typically this type of reading means that a short-term reprieve is near. My hope is that the payroll report that is due out tomorrow pleases Wall Street and pushes the futures higher at the open. This will most likely cause a gap and would push the Dow into a short-term extreme. The RSI Wilder (2) for the Dow (DIA) is currently 92 which is slightly below a short-term extreme.

I really do not have much to say at this junctue. Tomorrow cuold present some interesting opportunities for our strategies. As always I will let you (subscribers) know if and when a trade is placed.

Have a great night!

May 1, 2008 – Crowder’s Overbought/Oversold Readings

Major Benchmarks

Dow (DIA) – 80.2 (very overbought)
S&P (SPY) – 75.2 (overbought)
Russell 2000 (IWM) – 69.3 (neutral)
Nasdaq 100 (QQQQ) – 60.7 (neutral)
Emerging Markets (EEM) – 79.8 (overbought)

Sectors

Biotech (IBB) – 68.4 (neutral)
Consumer Discretionary (XLY) – 74.7 (overbought)
Health Care (XLV) – 65.4 (neutral)
Financial (XLF) – 75.0 (overbought)
Energy (XLE) – 31.3 (neutral)
Industrial (XLI) – 69.1 (neutral)
Materials (XLB) – 31.4 (neutral)
Real Estate (IYR) – 59.8 (neutral)
Retail (RTH) – 68.4 (neutral)
Utilities (XLU) – 60.5 (neutral)

International

Brazil (EWZ) – 70.4 (overbought)
China (FXI) – 80.2 (very overbought)

Others of Interest

Clean Energy (PBW) – 37.9 (neutral)
Water (PHO) – 78.1 (overbought)
Agriculture (DBA) – 26.1 (oversold)
Commodity Index (DBC) – 21.6 (oversold)
Oil Services (OIH) – 30.9 (neutral)

Filed Under Crowder's Daily Market Commentary ·

Overbought As Important Economic Data Nears

May 1, 2008

I really do not have much to say at this junctue. Tomorrow cuold present some interesting opportunities for our strategies. As always I will let you (subscribers) know if and when a trade is placed.

Have a great night!

May 1, 2008 – Crowder’s Overbought/Oversold Readings

Major Benchmarks

Dow (DIA) – 80.2 (very overbought)
S&P (SPY) – 75.2 (overbought)
Russell 2000 (IWM) – 69.3 (neutral)
Nasdaq 100 (QQQQ) – 60.7 (neutral)
Emerging Markets (EEM) – 79.8 (overbought)

Sectors

Biotech (IBB) – 68.4 (neutral)
Consumer Discretionary (XLY) – 74.7 (overbought)
Health Care (XLV) – 65.4 (neutral)
Financial (XLF) – 75.0 (overbought)
Energy (XLE) – 31.3 (neutral)
Industrial (XLI) – 69.1 (neutral)
Materials (XLB) – 31.4 (neutral)
Real Estate (IYR) – 59.8 (neutral)
Retail (RTH) – 68.4 (neutral)
Utilities (XLU) – 60.5 (neutral)

International

Brazil (EWZ) – 70.4 (overbought)
China (FXI) – 80.2 (very overbought)

Others of Interest

Clean Energy (PBW) – 37.9 (neutral)
Water (PHO) – 78.1 (overbought)
Agriculture (DBA) – 26.1 (oversold)
Commodity Index (DBC) – 21.6 (oversold)
Oil Services (OIH) – 30.9 (neutral)

Filed Under Crowder's Daily Market Commentary ·

Performance Page

May 1, 2008

Performance is the sole factor on which all investment strategies should be judged. Furthermore, an investment strategy is successful only if it has the ability to consistently outperform the market over the long-term. Unfortunately, those particular types of strategies are few and far between. My approach is to present subscribers with several simple and disciplined approaches to options trading which have resulted in consistent success over the long-term. The performance speaks for itself.

Performance Verified By Collective2.com

ETF Extremes Options Strategy

* There have been many emails directed towards the lack of trading in 2009. I decided to take of leave of absence from the strategy due to personal family matters. I did not feel it was in the strategy’s best interest to trade during this time. This is just one more reason why I have decided to only charge per successful month on www.collective2.com. Please do not hesitate to email me with any questions that you might have about the strategy or anything options related.

New Iron Condor Strategy!!!

Positions have yet to be established. Stay tuned!

Filed Under Crowder's Daily Market Commentary ·

Importance of Position-Sizing

May 1, 2008

The Importance of Position-Sizing

How much should I allocate to each trade?

This frequently asked question lacks definitive answers. Why? The answer is quite simple; as investors, we all have a different set of goals. There are just too many variables out there (age, income, retirement goals, spending habits, etc.) to give a universal answer to the question.

Options brokers allow you, the investor, the flexibility to allocate your account by specified dollar amount, specified quantity of contracts, percentage of available buying power, etc. It is your responsibility to figure out what works with your risk tolerance and investment goals.

This brings me to the important and rarely covered topic of Position-Sizing. Too many investor, especially options investor, have a casual attitude towards the risk-management of their investment portfolios. In the constant race for profit, risk management and money management seem to be secondary. The almighty return, the “we want a lot of return, we do not want any risk, and we want it by Monday” mentality, seems to override the importance of position-sizing.

This is particularly true in the options arena. How many websites have you come across that tout outlandish gains with minimal risk with great consistency. All that needs to be said is “think about it”.

This, of course, does not mean that the typical options investor can’t beat the market by a decent percentage annually. It just means that “shooting for the moon” is not sustainable.

The Gallup organization and UBS conducted a survey a few years back that found 39% of respondents believed stocks would deliver at least a 15% annual return over the next ten years. This goes to show how wishful thinking consumes a large portion of the investing publics’ attitude towards investment returns. Historically the notion of such investment returns is unreasonable.

“Whenever I enter a position, I have a predetermined stop. That is the only way I can sleep. I know where I’m getting out before I get in. The position size on a trade is determined by the stop and the stop is determined on a technical basis.” -Bruce Kovner

Position-sizing is possibly the most important aspect of any options portfolio and options trading system. As an investor you must always be aware of risk-management (how much you are comfortable losing per trade) and money management (the size of the position per trade).

So, as far as “how much you should allocate to each strategy”, trade, etc., the answers are ambiguous. I can only speak to the strategies I use. One thing is certain, position-sizing is an integral part of the strategies I follow.

Filed Under Crowder's Daily Market Commentary ·

Performance speaks for itself

May 1, 2008

I had my first loss of the year in the ETF Extremes strategy. I should probably say that it was only the second trade of the year, but even so, the strategy is still up 7.5% for the year. My performance goal for the year in both strategies is 30% – 50%.

The market moved just high enough to hit my stop-loss this morning, so I was unable to take advantage of the move lower after the fed announcement. The market could have easily interpreted the data differently, in which case the stop-loss woud have proved effective, but just the opposite occurred. Losing trades are a definite. It is how they are managed over the long-term that proves the success of a strategy and I think I have shown over the past few years that I have managed the strategy appropriately. The performance speaks for itself.

April 30, 2008 – Crowder’s Overbought/Oversold Readings

Major Benchmarks