No Post Tonight

There will not be a post tonight or tomorrow (most likely).

I am taking my twice a year break from the blog to rejuvenate. However, if we do move into an overbought situation tomorrow I will post and we could actually see a trade (to the downside) in both of the Extremes strategies. So stop by just in case.

Have a great!

Andy

Just Another Reason To Consider The ETF Extremes Options Strategy

Today, as I was sitting on the sidelines not affected by the panic, I pondered why more people were not subscribers to my ETF Extremes strategy. Is it greed, a lack of understanding, a need to trade frequently? I expect that it is all of the above.

As I stated in my weekly newsletter today:

First, I would like to point out that while the market has moved decisively lower during 2008 the ETF Extremes has moved roughly 45% higher on only 5 signals. Yes, patience pays.

The ETF Extremes strategy continues to outperform the major benchmarks by a sizable margin. By staying diligent and waiting for high probability setups I have been able to reap a 147.8% profit with a win ratio of 85% (17 out 20 winning trades). Of course, if I started with $10,000 the % return would be substantially higher (in the range of over 200%). Read why you should always have a buying-based options strategy integrated in your portfolio.

Yes, the strategy does not trade often. It is only exposed to the market a handful of days each year, but the days in which it is in the market are high-probability trades with a disciplined stop-loss enacted for each trade. Even if you want the action, would it not be prudent to at least diversify your portfolio or trading strategies with a strategy similar to the ETF Extremes?

I can’t figure out why more people are not piling in over here. Yes, I believe in my strategies or else I would not be doing this and the self-promotion is expected by most services, but the difference is that the ETF Extremes performance speaks for itself since its inception over 30 months ago.

If you like to know more about the strategy please do not hesitate to email me. I am more than willing to answer any of your strategy-related questions.

As for the technicals, well, all of the major benchmarks (and some sectors) have pushed back into an oversold state but have yet to hit an official extreme. I would prefer to see an extreme state before I take a short-term position. Of course, I will leave it up to the proprietary readings that have led to success as a trader.

Also, I would like to point out that the next level of major support (as seen on the fib. chart from a few days ago) which is $37.42. I expect to see some struggle here and if it does move lower the next major level would be around $33.20.

Overbought-Oversold levels for September 29, 2008

ETF Extremes Options Trading Strategy

* S&P 500 (SPY) - 23.0 (oversold)
* Dow Jones (DIA) - 29.5 (oversold)
* Russell 2000 (IWM) - 23.4 (oversold)
* NASDAQ 100 (QQQQ) - 20.8 (neutral)

Sector ETF Extremes Options Strategy

* Biotech (IBB) - 39.05 (neutral)
* Consumer Discretionary (XLY) - 23.6 (oversold)
* Health Care (XLV) - 29.2 (oversold)
* Financial (XLF) - 35.4 (neutral)
* Energy (XLE) - 25.9 (oversold)
* Industrial (XLI) - 18.1 (very oversold)
* Materials (XLB) - 14.4 (very oversold)
* Real Estate (IYR) - 36.3 (neutral)
* Retail (RTH) - 31.8 (neutral)
* Utilities (XLU) - 31.0 (neutral)

If you would like to follow my strategies with real-time alerts or have them auto-traded by a participating broker please click the following link! Try my options trading strategies. Remember, this is a marathon and not a sprint.

Overbought-Oversold for September 26, 2008

Here are the overbought-oversold readings as promised. Unfortunately, due to unforeseen circumstances I will not have the weekly newsletter available until tomorrow.

Have a great night!

Andy

Overbought-Oversold levels for September 26, 2008

ETF Extremes Options Trading Strategy

* S&P 500 (SPY) - 50.6 (neutral)
* Dow Jones (DIA) - 54.9 (neutral)
* Russell 2000 (IWM) - 47.3 (neutral)
* NASDAQ 100 (QQQQ) - 42.7 (neutral)

Sector ETF Extremes Options Strategy

* Biotech (IBB) - 63.2 (neutral)
* Consumer Discretionary (XLY) - 46.8 (neutral)
* Health Care (XLV) - 48.4 (neutral)
* Financial (XLF) - 59.4 (neutral)
* Energy (XLE) - 35.7 (neutral)
* Industrial (XLI) - 35.7 (neutral)
* Materials (XLB) - 28.9 (oversold)
* Real Estate (IYR) - 48.1 (neutral)
* Retail (RTH) - 49.3 (neutral)
* Utilities (XLU) - 53.1 (neutral)

If you would like to follow my strategies with real-time alerts or have them auto-traded by a participating broker please click the following link! Try my options trading strategies. Remember, this is a marathon and not a sprint.

Back Sunday

I am taking off for the weekend (to NYC), but don’t fret I will have the overbought-oversold numbers on Sunday as well as the Weekly Newsletter (for all of you that are newsletter subscribers). I hope all of you have a wonderful weekend!

Take care,

Andy

10 Year Fibonacci Retracement Levels on the NASDAQ 100 (QQQQ)

I am going to do things a bit different over the next few days. I want to show the Fibonacci Retracement levels for the benchmark ETFs I follow in the ETF Extremes options strategy. We can reference these levels as we go along and when certain important levels are hit, especially when they coincide with an overbought or oversold levels. I will also be presenting more Fib charts going forward with different time frames, but I will keep it confined to the ETFs I follow for the strategies so please do not ask for additional fib charts.

By the way have you checked the performance of the ETF Extremes strategy lately. It is up 147% since its inception over 30 months ago. Bear market, bull market, neutral, the ETF Extremes doesn’t care.

10 Year look at the NASDAQ 100 (QQQQ)

Click the thumbnail for the full image

As you can see the price of QQQQ sits right below the 38.2% retracement level which should act as a strong area of overhead resistance. The index is in a neutral state so we are not seeing any extremes at the moment, however; I expect to see the ETF struggle with the 38.2% retracement level going forward.

Random Market Comments

I still think we are headed lower going forward. Just take a look at my post from a few days ago on the 1932 Short Selling Ban. Several other stock markets have imposed such bans with similar results.

Most recent, the Karachi Stock Market (Pakistan) imposed a short selling ban only to see the stock market plummet after an initial 9% surge after the government intervention was announced and upwards of 15% a few days later. However, their market quickly rolled over and eventually lost 30%.

I am not stating that the U.S. market will suffer nearly as much, but I also do not think we are headed higher any time soon. I do not think the bailout will serve as a positive over the short or intermediate-term, especially when the short-selling ban is lifted in early October.

Moreover, have you seen the economic reports lately? They continue to be absolutely horrid, yet the focus remains on the bailout. Well, once the bailout is over and the market begins to focus on the economic indicators I think we are due for another sell off.

As you all know I usually try not to bother with the news at hand, but I just can’t resist at the moment.

Back to the Technical Mumbo Jumbo

Anyway, back to the current technical state of the market. Nothing new here. What a surprise, eh? I expect to see another test of the lows over the next few weeks. Hopefully, over the short-term we can watch a few extremes enter the market. I have been patiently waiting on the sidelines for the smoke to clear which is often hard to do as a trader. As always, I will wait for a high-probability situation to present itself and then act accordingly.

Have a great night! (I will try to post a few interesting reads later tonight if I have some free time)

• My good friend Tim Knight, founder of Prophet.net, has two things for you to remember in this crazy market.

Andy

Overbought-Oversold levels for September 25, 2008

ETF Extremes Options Trading Strategy

* S&P 500 (SPY) - 50.3 (neutral)
* Dow Jones (DIA) - 50.2 (neutral)
* Russell 2000 (IWM) - 44.6 (neutral)
* NASDAQ 100 (QQQQ) - 47.9 (neutral)

Sector ETF Extremes Options Strategy

* Biotech (IBB) - 53.2 (neutral)
* Consumer Discretionary (XLY) - 41.6 (neutral)
* Health Care (XLV) - 48.3 (neutral)
* Financial (XLF) - 53.4 (neutral)
* Energy (XLE) - 58.5 (neutral)
* Industrial (XLI) - 38.0 (neutral)
* Materials (XLB) - 37.8 (neutral)
* Real Estate (IYR) - 48.1 (neutral)
* Retail (RTH) - 39.6 (neutral)
* Utilities (XLU) - 52.6 (neutral)

If you would like to follow my strategies with real-time alerts or have them auto-traded by a participating broker please click the following link! Try my options trading strategies. Remember, this is a marathon and not a sprint.

Still Waiting

It was a lackluster session today. Volume was weak as most traders do not want to take a position especially an overnight position for fear of the worst.

Yes, the market is still waiting to hear the final details (if any) from the bailout plan. Until then I expect to see similar price action going forward, with a downside bias.

The major benchmarks have yet to move in a oversold state which is a bit surprising, so I am still sitting patiently on the sidelines.

As I mentioned yesterday, there are a few oversold reading in the Sector ETFs I follow, namely consumer discretionary (XLB) and retail (RTH). While the two have amde it through my initial screen they have yet to come close to a signal in my proprietary overbought/oversold indicators.

I am under the weather today so I apologize for the short post. Hopefully, this nagging cold will leave soon.

Have a great night!

Andy

Overbought-Oversold levels for September 24, 2008

ETF Extremes Options Trading Strategy

* S&P 500 (SPY) - 41.4 (neutral)
* Dow Jones (DIA) - 38.7 (neutral)
* Russell 2000 (IWM) - 41.5 (neutral)
* NASDAQ 100 (QQQQ) - 38.7 (neutral)

Sector ETF Extremes Options Strategy

* Biotech (IBB) - 44.9 (neutral)
* Consumer Discretionary (XLY) - 28.0 (oversold)
* Health Care (XLV) - 32.6 (neutral)
* Financial (XLF) - 37.3 (neutral)
* Energy (XLE) - 49.7 (neutral)
* Industrial (XLI) - 31.0 (neutral)
* Materials (XLB) - 39.7 (neutral)
* Real Estate (IYR) - 38.7 (neutral)
* Retail (RTH) - 24.6 (oversold)
* Utilities (XLU) - 42.6 (neutral)

If you would like to follow my strategies with real-time alerts or have them auto-traded by a participating broker please click the following link! Try my options trading strategies. Remember, this is a marathon and not a sprint.

1932 Ban On Short Sales

As always, Jason Goepfert of Sentimentrader has provided us with more insightful charts. he was kind enough to allow me to publish his latest chart along with some of his insightful commentary. I think you will find the information below extremely enlightening. Jason offers a service that is second to none. Give it a try!

Feb 15, 1932

COMPTON ATTACKS ‘FALSE’ SHORT SALES

Deals for Next Day’s Delivery Are Unfair.

Feb 18

CALLS ‘BEARS’ PERIL TO RECONSTRUCTION

W.R. Perkins Tells Senators Gravest Menace to Congress’s Steps Lies in Short Selling.

CHARGE HIRED PROPAGANDA

Rumors, True or False, Are Spread, He Says — Dr. S.S. Huebner Defends ‘Stabilizing’ Practice.

Feb 19

NEW EXCHANGE RULE PUTS DRASTIC CURB UPON SHORT SELLING

After April 1 Brokers Must Obtain Written Consent From Clients to Lend Stock.

END OF BIG BEARS IS SEEN

Market Rallies on Advance Rumors — Orders Sent to Coast After Close Here.

BAN HAILED IN CAPITAL

But Members of Congress Disagree on Whether It Will Head Off Legislation.

NEW EXCHANGE RULE CURBS SHORT SALES

In the most drastic reform introduced since the country-wide controversy over short selling began, the New York Stock Exchange announced yesterday that, beginning April 1, its member firms would be required tc obtain the express consent of customers before their stock could be lent to protect commitments on the down side of the market.

Feb 19

ACTION BY EXCHANGE GOOD, SENATORS SAY

But Disagree on Whether Curb on Short Sales Will Head Off Legislation.

SOME FOR CONGRESS BAN

Capper Believes Restrictions on Bears Were Prompted by Fear of Inquiry.

Feb 20

HOOVER REVEALS HE DEMANDED CURB ON SHORT SELLING

President Warned Exchange Heads They Must Adequately Protect Investors.

SEES RECOVERY RETARDED

Legislation With Administration Backing Is Hinted if Regulation Here Fails.

ACTION IN SENATE URGED Report on Regulatory Bills Is Asked — House Hearing Evokes Diverse Views.  President Hoover in a statement today condemned short selling for speculative profit on the New York Stock Exchange and said that he and other administration officials had frequently expressed the view to managers of the Exchange that measures should be taken to protect investors from “artificial depression” of the prices of securities they hold.

March 21

To the Editor of The New York Times: Short sales of stock are an almost unmitigated evil, and if Congress can devise means to limit or perhaps eliminate the practice altogether, it will have taken a long step forward in preventing such disaster as almost overwhelmed that portion of the public which endeavors to save and invest some portion of its income and for a time threatened to overturn our entire financial system last December.

April 10

GET DATA FOR SENATORS

Brokers Comply With Exchange Request for Full Reports on All Short Sales.

With stocks rallying moderately as uneasy speculators covered their short commitments, the New York Stock Exchange proceeded yesterday with feverish haste to assemble the vast amount of statistical evidence which Richard Whitney, its president, has been directed to produce at the opening tomorrow in Washington of the Senate Banking and Currency Committee’s market investigation.

The Strategies

As for our options strategies, well, if all goes well over the next few days we could witness our first signal in the ETF Extremes in over a month and our second signal in the last two weeks in the Sector ETF Extremes. Furthermore,  with QQQQ closing near the lows of the day we could also see a Gap Fade opportunity tomorrow as well. three trades in one day? It is quite possible.

The Sectors that I am watching closely are the retail sector (RTH), health care (XLV) and consumer discretionary (XLV). All three have moved into a short-term oversold state that my initial screen has been triggered. Now on to my proprietary measures for the final decision.

Overbought-Oversold levels for September 23, 2008

ETF Extremes Options Trading Strategy

* S&P 500 (SPY) - 39.6 (neutral)
* Dow Jones (DIA) - 39.2 (neutral)
* Russell 2000 (IWM) - 46.4 (neutral)
* NASDAQ 100 (QQQQ) - 34.2 (neutral)

Sector ETF Extremes Options Strategy

* Biotech (IBB) - 36.7 (neutral)
* Consumer Discretionary (XLY) - 29.2 (oversold)
* Health Care (XLV) - 23.4 (oversold)
* Financial (XLF) - 49.1 (neutral)
* Energy (XLE) - 32.0 (neutral)
* Industrial (XLI) - 49.4 (neutral)
* Materials (XLB) - 43.1 (neutral)
* Real Estate (IYR) - 43.2 (neutral)
* Retail (RTH) - 26.3 (oversold)
* Utilities (XLU) - 37.5 (neutral)

If you would like to follow my strategies with real-time alerts or have them auto-traded by a participating broker please click the following link! Try my options trading strategies. Remember, this is a marathon and not a sprint.

Retail Sector Hits Short-term Oversold State

Short post tonight.

First I would like to point out that the upside gaps in all of the major benchmark ETF that we follow here have officially closed. It looks like the historical tendencies lived up to their billing once again. Congrats to those of you who write in and stated handsome profits from the phenomenon. I don’t trade based solely on historical or seasonal tendencies, but with a near overbought reading and a large upside gap that went unclosed Friday the probability of a decline today increased substantially (as stated in my post from Sunday). Congrats again!

As always, I have updated daily overbought-oversold readings. The only ETF that is near an extreme is the retail sector ETF (RTH), but it still has a bit further to go before it hits an extreme.

My guess is that we eventually see a retest of the lows established next week. Uncertainty is rabid among traders and as we all know that does not bode well in most cases. Everyone wants to know that what happens after this last ditch effort from the government? What happens when short selling is allowed back on the street? One thing is certain, back in 1932 the halt on short selling led to a short-term bounce followed by a long deep decline. Will this be the fate of our current situation? Only time will tell. Either way, my options strategies should continue to out perform the market over the long-term.

Have a great night. Sorry about the short post, I will be back early tomorrow with a few interesting posts.

Andy

Overbought-Oversold levels for September 22, 2008

ETF Extremes Options Trading Strategy

* S&P 500 (SPY) - 49.1 (neutral)
* Dow Jones (DIA) - 46.5 (neutral)
* Russell 2000 (IWM) - 50.3 (neutral)
* NASDAQ 100 (QQQQ) - 36.8 (neutral)

Sector ETF Extremes Options Strategy

* Biotech (IBB) - 41.5 (neutral)
* Consumer Discretionary (XLY) - 33.2 (neutral)
* Health Care (XLV) - 32.7 (neutral)
* Financial (XLF) - 33.2 (neutral)
* Energy (XLE) - 670.3 (neutral)
* Industrial (XLI) - 40.2 (neutral)
* Materials (XLB) - 59.8 (neutral)
* Real Estate (IYR) - 41.5 (neutral)
* Retail (RTH) - 28.1 (oversold)
* Utilities (XLU) - 43.4 (neutral)

If you would like to follow my strategies with real-time alerts or have them auto-traded by a participating broker please click the following link! Try my options trading strategies. Remember, this is a marathon and not a sprint.

Gap Tendencies and the Options Expiration Aftermath

Below is the large gap from Friday. As I have stated repeatedly in the past, gaps in the major benchmarks have a tendency to fade sooner than later especially when they are as large as the one from Friday. Couple the gap with the historical tendency for weakness on the day following options expiration and the probability of a declining day Monday increases substantially.

I just wanted to point this out before Monday’s open. I hope all of you had a wonderful weekend and newsletter subscribers please check your emails for the September Expiration report.

As always, if you have any questions or comments please do not hesitate to email me or use the comment section at the bottom of the most recent post.

Overbought-Oversold for September 19, 2008

I will be back later this weekend with a post market/premarket summary. Also, I will also be sending out the expiration report to newsletter subscribers. Look for that late Sunday. Have a great weekend!

Overbought-Oversold levels for September 18, 2008

ETF Extremes Options Trading Strategy

* S&P 500 (SPY) - 58.1 (neutral)
* Dow Jones (DIA) - 59.8 (neutral)
* Russell 2000 (IWM) - 67.0 (neutral)
* NASDAQ 100 (QQQQ) - 54.2 (neutral)

Sector ETF Extremes Options Strategy

* Biotech (IBB) - 55.5 (neutral)
* Consumer Discretionary (XLY) - 50.3 (neutral)
* Health Care (XLV) - 49.8 (neutral)
* Financial (XLF) - 65.2 (neutral)
* Energy (XLE) - 67.3 (neutral)
* Industrial (XLI) - 50.9 (neutral)
* Materials (XLB) - 67.5 (neutral)
* Real Estate (IYR) - 65.9 (neutral)
* Retail (RTH) - 42.7 (neutral)
* Utilities (XLU) - 53.2 (neutral)

If you would like to follow my strategies with real-time alerts or have them auto-traded by a participating broker please click the following link! Try my options trading strategies. Remember, this is a marathon and not a sprint. Trading often does not mean trading success.

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