July 21, 2017

Archives for June 2008

Headed for Worst June Since Depression?

June is shaping up to be the worst June since the Depression era. Whenever the market dips this sharply this fast we often see a reversal in the following month. I do think that before that happens we could see a dip to close the gap in the NASDAQ 100 (QQQQ) that occurred back in mid-April (4/16): a level I think could act as an intermediate-term base. The Dow (DIA) and the industrial sector (XLI) continue to lead the overall market lower. The two ETFs have moved to short-term oversold levels not seen in years. The RSI (2) (one of the short-term overbought/oversold indicators I prefer) for DIA and XLI are currently 0.4 and 0.8, respectively. Both are in short-term extremes which is often the precursor for a short-term bounce. Again, … [Read more...]

Short-term Oversold Extremes Hit the Market

First, I would like to point out that one of the two gaps in the tech-heavy NASDAQ 100 (QQQQ) closed today. The gap from 4/18 closed and now the gap from 4/16 will most likely be next. QQQQ will have to push lower to $44.32, or $1.33 to close the gap. I have spoken about the aforementioned gaps for quite some time now. Now that one half of the move is complete, I would expect to see the other gap close soon. However, I do think that the major benchmarks are in a short-term extreme state we could see a bounce over the next few days. The RSI (2) for the Dow (DIA) is currently 0.6 and the last time we witnessed a reading this low was back on 1/8/08. The Dow (DIA) bounced the following two days only to turn sharply lower … [Read more...]

Late Post Tonight

I will be away shortly after the bell today so expect a late post tonight. If market levels stay where they are I expect to see a signal tomorrow in the ETF Extremes strategy and the Sector ETF Extremes. I will have more to discuss on this topic later tonight. Stay tuned. Happy trading! Andrew … [Read more...]

Post Fed?

Oversold levels dominated the market coming into "fed day", but I am never a fan of taking a position ahead of an event that can move the market against you (and your position) in a matter of seconds. In options trading such a quick move can be devastating to a position, which is why the risk/reward always prohibits me from placing a trade ahead of major market moving events. Interestingly enough the DOW (DIA) and the Industrials (XLI) are still in an oversold state and with the post-fed reversal that typically occurs a day or two after the release we could see a short-term extreme reading in both of these ETFs over the coming days. My hope was to see a washout today so that I could place a few trades in our options extremes strategies, … [Read more...]

Major Benchmarks Short-term Oversold

The four major market benchmarks are officially in a short-term oversold state with the market stalwart, S&P 500 (SPY) in an extreme short-term oversold state. The RSI (2) for SPY is currently 3.6. The last time the RSI (2) for SPY hit a level this low was 5/23 and 4/14/ Both instances witnessed a short-term rally in SPY immediately following the extreme reading. Tomorrow brings the almighty Fed and surely a volatile market after the release at 2:15 EST. My hope is that we get a bit of a washout move which would not surprise me given the recent barrage by the bears. Three of the sector ETFs I follow (IYR, XLB, XLI) have also moved into a short-term oversold state. Unfortunately for the Sector ETF Extremes strategy the shortest-term … [Read more...]

Fed Annoucement Around the Corner

The major benchmarks are still an oversold to near oversold state. Unfortunately, I need to see the underlying ETFs push lower into a short-term very oversold state before I will take a position. There are also quite a few sector ETFs that have moved into a short-term oversold state, but again I would like to see a very oversold or extreme reading before considering taking a position. Now we have the highly anticipated Fed policy announcement to contend with on Wednesday at 2:15 EST. My hope is that we see the a further short-term decline so that a signal is triggered in our two extreme portfolios. Sorry for the late post. Have a great night. Overbought/Oversold Levels for June 23, 2008 ETF Extremes Options … [Read more...]

Options Expiration Blues – SPY in Very Oversold State

What a way to end the week. The two unclosed gaps (4/16 and 4/18) in the NASDAQ 100 (QQQQ) that I have mentioned over the past several weeks are coming back in the picture. Amazingly, even with today's sharp decline the QQQQ and IWM are still in a neutral state. However, the two major benchmarks, S&P 500 (SPY) and Dow (DIA) have pushed into a very oversold state and certainly a push lower Monday would trigger a signal in the ETF Extremes. We shall see soon enough. As for the Secotr ETFs I am keeping a close eye on Health Care (XLV). It narrowly escaped a very oversold reading. The RSI (2) is still above 5 which is slightly above where I would like it to be before I feel comfortable sinking any capital into a position. One thing is … [Read more...]

High-Beta Sectors Lead the Way – Overbought/Oversold as an Indicator

The tech-heavy NASDAQ 100 (QQQQ) and small-cap Russell 2000 led the led the oversold bounce today. It was the stereotypically volatile day that often occurs during the week of options expiration. Today, along with many others, people ask or comment about how overbought/oversold indicators are no big deal and that overbought/oversold states can remain irrational for "longer than you can remain solvent". Well, I guess in a way that is true, but unfortunately it is a rather simplistic way to approach trading and unfortunately, a frame of mind that often displays the lack of experience needed to survive for a long period of time in this game¬† and livelihood we know as trading. I use a few reasonably simple overbought/oversold … [Read more...]

Gap Fade Options Strategy and Signal Nearing for New Sector ETF Extremes Options Strategy

The NASDAQ 100 (QQQQ) opened lower today for a gap lower. However, the gap was only $.21, which in most cases is a borderline signal. Had QQQQ been in a short-term oversold state a signal would have been triggered, but with the tech-heavy index firmly in a neutral state and the gap only $.20 a signal was not triggered and the strategy was better for it as we were able to avoid a loss for the trade. The risk/reward just isn't high enough when the gap is only $.20 while QQQQ is in a neutral state. I typically purchase an in-the-money option with a delta between .50 and .65 and when taking the bid/ask spread penalty in to account a gap close on a gap like today would have limited gains. As I said the strategy avoided a loss and who knows we … [Read more...]

Underlying ETF Options Still In A Neutal State

The NASDAQ 100 (QQQQ) Gap Fade options strategy was extremely close to a signal at the open this morning, but unfortunately, QQQQ opened slightly below yesterday's high. The last few trading days have been close calls for the the Gap Fade strategy as QQQQ has closed near session lows and highs. Today was no different as QQQQ closed near the session lows at $48.54, with the low being $48.47 so a lower open tomorrow coutld trigger a signal if the initial decline is deep enough to warrant a good risk/reward and therefore a trade. Subscribers to the strategy, as always, will receive a real-time trade alert when and if one occurs. As for the rest of you, well, I will inform you here (at the daily options blog) of any trade and the … [Read more...]