Short-term Reading States Reprieve is Near
October 14, 2009
The Dow has pushed above 10,000 for the first time since October 8th of last year. With the strong rally comes a short-term “very overbought” state which typically means a reprieve (1-3 days) is right around the corner.
When I look further at the other major market indices I notice that the Nasdaq 100 (QQQQ) is also in a n overbought state, but the Wilder RSI (2) (a short-term overbought/oversold measure) is pinned at 99.5, one of its highest historical readings. This is a powerful signal and one that states a fade is in the near future (1-3 days). While I think we will see a decent move to the downside immediately following options expiration (the day after), I think we might just see a smaller move to the downside tomorrow or Friday.
All we have as traders, market participants is probability and on a short-term basis the probability of a short-term move lower is overwhelmingly showing a decline.
Could we see our first trade in our ETF Extremes Strategy since early February? It certainly looks that way, particularly if the market opens higher tomorrow.
I am still working on my book and will hopefully have it available in the next few weeks. Cross your fingers!
Overbought-Oversold levels for October 14, 2009
ETF Extremes Options Trading Strategy
* S&P 500 (SPY) – 82.3 (very overbought)
* Dow Jones (DIA) – 84.2 (very overbought)
* Russell 2000 (IWM) – 76.8 (overbought)
* NASDAQ 100 (QQQQ) – 82.9 (very overbought)
Other ETFs
* Ultra Long (SSO) – 82.8 (overbought)
* Ultra Short (SDS) – 17.6 (very oversold)
Fear Pushes Market Lower – Currently Oversold
October 1, 2009
All of the major market indices pushed lower today and into an “oversold” state. At this juncture, my preference would be to see the Wilder RSI (2) push below (at least) 5 before I make a move. The lower the RSI (2) to the better so, we shall see. One thing is certain a trade looks imminent. We all know that it has been a while so it will be a happy day if/when the trade occurs. Remember, as I always say “patience pays”. Just look at our historical performance. yes, it is easy to get caught up on the number of trades, but the overall performance is really the number you should be looking at for the most accurate results. Please email me if you have any questions.
Overbought-Oversold levels for October 1, 2009
ETF Extremes Options Trading Strategy
* S&P 500 (SPY) – 21.7 (oversold)
* Dow Jones (DIA) – 23.2 (oversold)
* Russell 2000 (IWM) – 25.2 (oversold)
* NASDAQ 100 (QQQQ) – 24.7 (oversold)
Other ETFs
* Ultra Long (SSO) – 24.9 (oversold)
* Ultra Short (SDS) – 73.9 (overbought)
