Nice week for the ETF Extremes - Stay Tuned for Weekend Update

Overall it was a great week for our small newsletter service. After a roughly two months of sitting on the sidelines the ETF Extremes managed to have another profitable trade - 13.3% to be exact. It has been quite a ride for the ETF Extremes over the past 30 months with close to a 86% win ratio (18/21 winning trades). Yes, only 21 trades in 30 months, but the key is to look at the final result. The performance speaks for itself. The strategy is once again near the top of the list for options strategies at the third-party newsletter monitoring service pro-trading-profits.

One thing is certain, the high-probability approach (trading extremes) has proven successful. 

Sector ETF Extremes

The strategy has not had a trade in several weeks, but that could change quickly as we head into next week. Newsletter subscribers stay tuned to the upcoming weekend report for more details. 

I will try and get a few posts out this weekend, but it obviously depends on how busy things are around here. It has been a week of sickness in my household and for obvious reasons a few of my projects have been put on the back burner. hopefully, I can make up for lost time over the next few days. 

Have a great weekend!

Andy

 

Overbought-Oversold levels for October 31, 2008

ETF Extremes Options Trading Strategy

* S&P 500 (SPY) - 62.0 (neutral)
* Dow Jones (DIA) - 62.2 (neutral)
* Russell 2000 (IWM) - 66.7 (neutral)
* NASDAQ 100 (QQQQ) - 64.2 (neutral)

Sector ETF Extremes Options Strategy

* Biotech (IBB) - 65.8 (neutral)
* Consumer Discretionary (XLY) - 72.2 (overbought)
* Health Care (XLV) - 64.3 (neutral)
* Financial (XLF) - 58.3 (neutral)
* Energy (XLE) - 65.4 (neutral)
* Industrial (XLI) - 67.6 (neutral)
* Materials (XLB) - 61.6 (neutral)
* Real Estate (IYR) - 64.3 (neutral)
* Retail (RTH) - 72.1 (overbought)
* Utilities (XLU) - 57.5  (neutral)

Ultra Extremes (Insiders Page Only)

* Ultra Long (SSO) - 56.0 (neutral)
* Ultra Short (SDS) - 37.0 (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.

Potential Short-Term Overbought State Ahead???

Another rally today and another push closer to a short-term overbought extreme. While I do think the intermediate-term outlook is bullish (at least through the 4th quarter) I do think that we will witness a short-term pullback before we see another decent leg to the upside. I have stated this repeatedly over the past few weeks.

We do have some positive seasonality ahead.  The first three days of November are overwhelmingly bullish which could help to push the market into a short-term overbought state which could lead to another signal in our ETF Extremes strategy and potentially in our Sector ETF Extremes strategy. I do not trade based on seasonal biases alone, but I do like to keep close tabs on the historical seasonal extremes in the market and how they line up with current market conditions.

ETF Extremes

Yes, the overwhelming success of the strategy over the past 30 months has led to a surge in subscribers. As I have stated repeatedly in the past, I limit the number of subscribers to the newsletter so if you wish to get in please do so soon. I will cap the strategy at 100 for various reasons (liquidity, customer service, etc). However, if you happen to get in late, don’t worry, I will put you on the wait list. I say don’t worry because I often get subscribers who do not understand how I trade the ETF Extremes (they want action) so they are unable to sit patiently on the sidelines for a high-probability setup to occur and eventually their impatience gets the best of them and they move on. For those of you who are interested, please remember, this is a long-term approach using ETF options. So far the strategy has exceeded 150% over the past 30 months and that is with monthly subscription costs and commissions included. As you can tell I am proud of the efforts and the overwhelming success of the ETF Extremes strategy. Subscribe today!

Overbought-Oversold levels for October 30, 2008

ETF Extremes Options Trading Strategy

* S&P 500 (SPY) - 60.5 (neutral)
* Dow Jones (DIA) - 60.2 (neutral)
* Russell 2000 (IWM) - 58.0 (neutral)
* NASDAQ 100 (QQQQ) - 63.9 (neutral)

Sector ETF Extremes Options Strategy

* Biotech (IBB) - 62.2 (neutral)
* Consumer Discretionary (XLY) - 63.0 (neutral)
* Health Care (XLV) - 57.4 (neutral)
* Financial (XLF) - 50.8 (neutral)
* Energy (XLE) - 62.9 (neutral)
* Industrial (XLI) - 60.5 (neutral)
* Materials (XLB) - 59.0 (neutral)
* Real Estate (IYR) - 51.3 (neutral)
* Retail (RTH) - 65.0 (neutral)
* Utilities (XLU) - 62.1  (neutral)

Ultra Extremes (Insiders Page Only)

* Ultra Long (SSO) - 56.0 (neutral)
* Ultra Short (SDS) - 37.0 (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.

Support and Resistance - ETF Extremes

Some Random Thoughts

The highly anticipated Fed announcement left much to be desired. Everyone knew that at least a 50 basis point cut was the most likely scenario, but most traders were hoping for a deeper cut of 75 basis points. The reaction was volatile after the announcement, but settled down towards the final minutes of the trading day to close lower.

On the heels of another successful ETF Extremes (read yesterday’s post) trade is an expected neutral market which is indicated by all of the short-term overbought/oversold readings below.

I am still focused on the tech-heavy Nasdaq 100 (QQQQ). There is currently a lot of wiggle room between the next area of support (approx. $29.25) and resistance (approx. $34.28) and with the ETF well within a neutral state I will once again wait patiently for the next setup. Sometimes signals happen in groups much like when the strategy was first initiated roughly 30 months ago. I guess we will find out soon enough. Sorry for the short post.

Have a great night.

Andy

Overbought-Oversold Readings

Here are the overbought/oversold readings. I will be back later this evening with a post. Stay tuned!

Overbought-Oversold levels for October 29, 2008

ETF Extremes Options Trading Strategy

* S&P 500 (SPY) - 55.3 (neutral)
* Dow Jones (DIA) - 53.2 (neutral)
* Russell 2000 (IWM) - 44.1 (neutral)
* NASDAQ 100 (QQQQ) - 55.8 (neutral)

Sector ETF Extremes Options Strategy

* Biotech (IBB) - 54.0 (neutral)
* Consumer Discretionary (XLY) - 55.7 (neutral)
* Health Care (XLV) - 49.1 (neutral)
* Financial (XLF) - 56.5 (neutral)
* Energy (XLE) - 56.3 (neutral)
* Industrial (XLI) - 51.3 (neutral)
* Materials (XLB) - 53.4 (neutral)
* Real Estate (IYR) - 42.4 (neutral)
* Retail (RTH) - 60.9 (neutral)
* Utilities (XLU) - 50.5 (neutral)

Ultra Extremes (Insiders Page Only)

* Ultra Long (SSO) - 49.5 (neutral)
* Ultra Short (SDS) - 43.6 (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.

Another Successful Day for the Options Strategies - ETF Extremes Strategy Continues to Shine

It was a wonderful day for the ETF Extremes and New Ultra Extremes (Insiders Page only).

The ETF Extremes strategy made 13.7% while the Ultra Extremes made 13.3% (options portfolio) and 4.0% (equity-only).

I am ecstatic about the results today (other than one exception which I will discuss at the end). The ETF Extremes strategy continues to outperform the market by a substantial margin and due to the success over the past three years I am debating starting a fund that employs the basic tenets of the ETF Extremes guidelines and my proprietary indicators.

As discussed in the options blog on the site I have been watching the strong support at $29.25 in QQQQ and was waiting to see a push into a short-term oversold state. The short-term extreme came today and as a result I placed a trade.

The strategy had its last trade in early August when the S&P 500 (SPY) was trading at around $126. Now it is roughly 25% lower. During that time I patiently waited for a signal to occur in the strategy and today that patience paid. The trade made 13.7%.

The strategy has an average return per trade of 8.3% and a win ratio of approximately 86% over the last 30 months (18/21 winning trades). Some subscribers have reported gains of over 290% since the portfolio was initiated back in April of 2006. Your return obviously depends on your trade allocation which is direct reflection of your personal risk tolerance.

The other important consideration is the max loss. Over the course of the last three years the max loss on a trade is approximately 17%. This is what truly keeps the strategy moving in the right direction. Risk-management is the most important aspect of any strategy. If you look at other services and the strategies they offer I am certain you will find some hefty losses in there so a win ratio of over 80% doesn’t mean much. The max loss of a strategy is important and something you should always take a close look at before delving into a specific options strategy.

Basically, the stagnant period in the ETF Extremes strategy and my determination to be patient has the ETF Extremes strategy up 40% since the last trade was placed back in early August. How many strategies can tout those type of efforts?

As for the New strategy that uses SSO and SDS as the underlying ETFs of choice, well, much like the ETF Extremes I am ecstatic about today’s results. SSO hit an extreme short-term oversold state so I bought some Dec08 25 calls for $4.50 and was able to sell them for a $.60 gain, or 13.3% roughly two hours later. The exact trades, including timestamps, can be found in some of my earlier posts today. I really think this could be a viable strategy, but it is one that I want to watch for several months before truly implementing it into my core strategy list. I will post an article this weekend on the Insiders Page of the website (paid subscribers only) that goes over the trade in detail. Stay tuned!

My one complaint today, and it is a big one is the amount of money I left on the table. This is the one aspect of trading that is the most difficult and often overlooked. However, as sad as I am about the money I left on the table I did not want to risk a quick turn for the worse given the recent spike in volatility. I will discuss this more in the near future.

Another Banner Day for the ETF Extremes Options Strategy

It was a good day for several of my options strategies. Both, the ETF Extremes options strategy and the New Ultra Extremes strategy (Insiders Page Only) had profitable days. The ETF Extremes continues its winning ways by patiently waiting for high-probability trading opportunities. More details to come.

I am in the process of updating the performance page on the website as well as the Insiders page so I will not have another post to this page until later tonight. I will discuss the ETF Extremes trade in full, so stay tuned.

One thing is certain, the ETF Extremes strategy continues to thrive (up 13.7% today), especially over the long-term. The track record can’t be denied.

Overbought-Oversold levels for October 28, 2008

ETF Extremes Options Trading Strategy

* S&P 500 (SPY) - 54.6 (neutral)
* Dow Jones (DIA) - 58.1 (neutral)
* Russell 2000 (IWM) - 42.6 (neutral)
* NASDAQ 100 (QQQQ) - 56.6 (neutral)

Sector ETF Extremes Options Strategy

* Biotech (IBB) - 44.6 (neutral)
* Consumer Discretionary (XLY) - 50.6 (neutral)
* Health Care (XLV) - 51.4 (neutral)
* Financial (XLF) - 55.3 (neutral)
* Energy (XLE) - 53.5 (neutral)
* Industrial (XLI) - 50.2 (neutral)
* Materials (XLB) - 45.9 (neutral)
* Real Estate (IYR) - 48.5 (neutral)
* Retail (RTH) - 61.7 (neutral)
* Utilities (XLU) - 59.1 (neutral)

Ultra Extremes (Insiders Page Only)

* Ultra Long (SSO) - 39.1 (neutral)
* Ultra Short (SDS) - 39.0 (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.

Subscribers - Check the Insider’s Page of the website for the first Ultra Extremes trade.

Yes, I have added another strategy to the mix, but this one will only be available to paid subscribers. I just wanted to clear up any confusion on the matter because I have had a few emails recently.

Anway, subscribers, if you are interested in the trade please check the Insiders Page of the website for all the details. Click on the thumbnail. The trade is time-stamped with all the details. Let me know if you have any questions.

Andy

The Volatility Is Maddening

We are only 90 minutes into the trading day and already the S&P 500 (SPY) has moved from a high of $88.31 to now a new low at $84.53.

Opportunities are made up easier than losses is my matra at this stage. For a mean reversion trader like myself, very short-term intraday trades have been tough. Volatility would have certainly stopped me out of several potential trades in the recent past.  So, for risk-management purposes I will continue to patiently wait on the sidelines until a high-probability trade set-up occurs. If a trade does indeed occur I will keep my stop-losses at the same levels.

Trades Abound?

The market moved further into a short-term oversold state and in some areas an extreme short-term ‘very oversold’ state. We continue to see temporary bullish price action, but the efforts have not been sustained and eventually sell-off towards the latter part of the trading day.

The major market benchmarks (DIA and SPY) once again held the October 10 lows. As I stated last week, a move into a short-term ‘oversold’ to ‘very oversold’ state while successfully testing the October 10 low could lead to a signal in a few of our options strategies.

Simply put, this market is stretched!

I am watching a few of the ETFs in the ETF Extremes and Sector ETF Extremes strategies. Moreover, we will most likely see a trade in our new Ultra Extremes strategy. Subscribers, I will inform you on the Insiders Page if and when a trade occurs. I will also post a trade summary at the end of the day and post an a detailed analysis of the trade. Remember, the strategy will follow an equity-only portfolio as well as an options-only portfolio. It should be interesting to see how this strategy works over the long-term.

Overbought-Oversold levels for October 27, 2008

ETF Extremes Options Trading Strategy

* S&P 500 (SPY) - 25.2 (oversold)
* Dow Jones (DIA) - 29.4 (oversold)
* Russell 2000 (IWM) - 19.6 (very oversold)
* NASDAQ 100 (QQQQ) - 22.8 (oversold)

Sector ETF Extremes Options Strategy

* Biotech (IBB) - 23.6 (oversold)
* Consumer Discretionary (XLY) - 17.5 (very oversold)
* Health Care (XLV) - 26.7 (oversold)
* Financial (XLF) - 22.1 (oversold)
* Energy (XLE) - 30.4 (neutral)
* Industrial (XLI) - 18.7 (very oversold)
* Materials (XLB) - 17.6 (very oversold)
* Real Estate (IYR) - 13.9 (oversold)
* Retail (RTH) - 20.5 (oversold)
* Utilities (XLU) - 33.1 (neutral)

Ultra Extremes (Insiders Page Only)

* Ultra Long (SSO) - 20.8 (oversold)
* Ultra Short (SDS) - 73.2 (overbought)

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.

It is all about managing risk.

As I predicted, QQQQ struggled with support around the $29.25 area. The underlying ETF did carve out new lows (down to $28.90) before it began to rally late in the day (check the recent post with my QQQQ Fib chart). The higher beta Nasdaq 100 (QQQQ) and Russell 2000 (IWM) struggled mightily all day while the market stalwarts, the Dow (DIA) and S&P 500 (SPY) were able to move into positive before the end of the trading day.

I wanted to place a trade, but my price target was not met and as a result I did not send out a trade alert to subscribers. The recent volatility (5%-7% swings intraday) has certainly increased the risk of any trade particularly if they border on marginal and my strategies will not accept marginal trades which is why they can experience stagnant periods.

So, as I have for what seems like an eternity I am sitting patiently on the sidelines. It seems to work to my advantage over and over again.

Have a great night and hang in there!

Andy

Overbought-Oversold levels for October 23, 2008

ETF Extremes Options Trading Strategy

* S&P 500 (SPY) - 39.4 (neutral)
* Dow Jones (DIA) - 44.6 (neutral)
* Russell 2000 (IWM) - 29.6 (oversold)
* NASDAQ 100 (QQQQ) - 33.6 (neutral)

Sector ETF Extremes Options Strategy

* Biotech (IBB) - 40.1 (neutral)
* Consumer Discretionary (XLY) - 21.3 (oversold)
* Health Care (XLV) - 38.5 (neutral)
* Financial (XLF) - 32.5 (neutral)
* Energy (XLE) - 43.5 (neutral)
* Industrial (XLI) - 31.4 (neutral)
* Materials (XLB) - 30.7 (neutral)
* Real Estate (IYR) - 17.6 (very oversold)
* Retail (RTH) - 24.5 (oversold)
* Utilities (XLU) - 48.7 (neutral)

Ultra Extremes (Insiders Page Only)

* Ultra Long (SSO) - 31.5 (neutral)
* Ultra Short (SDS) - 58.9 (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.

Next Page »