Tech-Heavy Indices Remain in Short-Term Overbought State

October 29, 2010

QQQQ has been hovering around $52 for over a week now while simultaneously pushing into a short-term overbought state. Something has to give, but my guess is that it will not occur until the elections and the ucoming fed meeting are over. I am still considering a position in QLD for a short-term play. With an RSI (2) reading of over 98 the probability of a short-term decline looks likely.

I will be back later today with more info.

Also, sorry about the lack of a post yesterday. It was a trying personal day for me, but I promise that my daily high-probability, mean-reversion indicators will be back in full force this afternoon.

Thanks again for all of the loyal support.

Kindest,

Andy

Filed Under Crowder's Daily Market Commentary ·

SMH, QQQQ, and QLD reach extreme overbought state.

October 26, 2010

The semiconductors (SMH), tech-heavy Nasdaq 100 (QQQQ) and its counterpart the UltraLong QQQQ (QLD) have all reached an extreme state. All three have RSI (2) readings above 95 which typically means that a short-term decline is near.

I am a bit concerned about the seasonal picture ahead as the last two days of October are bullish and the upcoming election increases the bullishness that much more.

We shall see soon enough what occurs over the next week or so. Another push lower and I will not hesitate to take off the FXI puts for a nice gain. Currently they are higher 46.6%, but they were as high as 68% this morning. Moreover, I need to start moving the SPY puts out of the portfolio. It is going to be a loss, unless we see a 5% drop over the next week or so, but hey, losses are the only guarantee in trading. As for my TZA longs, well, I intend to hold them a bit longer. A move to $25 would trigger an exit. $22 still seems to be a decent area of support so I will continue to use that as my stop-loss.

Also, I just wanted to welcome all of the new readers. Traffic has picked up lately and it is my hope that the comments section under each port will pick up as a result. Let us begin to help each other out with our trading endeavors. Ideas are encouraged, particularly those that involve the use of options.

Short-Term, High-Probability, Mean Reversion Indicator – as of close 10/27

Benchmark ETFs

S&P 500 (SPY) – 61.9 (neutral)
Dow Jones (DIA) – 54.5 (neutral)
Russell 2000 (IWM) – 57.8 (neutral)
NASDAQ 100 (QQQQ) – 83.6 (very overbought) / RSI (2) – 97.5

Sector ETFs

Biotech (IBB) –64.1 (neutral)
Consumer Discretionary (XLY) – 63.3 (overbought)
Health Care (XLV) – 63.3 (neutral)
Financial (XLF) – 49.2 (neutral)
Energy (XLE) – 59.4 (neutral)
Gold Miners (GDX) – 36.3 (neutral)
Industrial (XLI) – 43.2 (neutral)
Materials (XLB) – 48.9 (neutral)
Real Estate (IYR) – 40.2 (neutral)
Retail (RTH) – 48.1 (neutral)
Semiconductor (SMH) – 82.4 (very overbought) / RSI (2) – 95.5
United States Oil Fund (USO) – 48.4 (neutral)
Utilities (XLU) – 26.6 (neutral)

International ETFs

Brazil (EWZ) – 35.4 (neutral)
China 25 (FXI) – 36.3 (neutral)
EAFE (EFA) – 37.0 (neutral)
South Korea (EWY) – 44.8 (neutral)

Commodity ETFs

Gold (GLD) – 36.0 (neutral)

Ultra Extremes

Small Cap Bear 3x (TZA) – 40.6 (neutral)
Small-Cap Bull 3x (TNA) – 56.7 (neutral)
UltraLong QQQQ (QLD) – 83.2 (very overbought) / RSI (2) – 97.3
Ultra Long S&P 500 (SSO) – 59.2 (neutral)
Ultra Short S&P 500 (SDS) – 40.3 (oversold)
UltraShort 20+ Treasury (TBT) – 75.9 (overbought)

I work hard to bring you my latest views, opinions and research on a daily basis. If you are a loyal reader and find my thoughts useful please show your support by joining my newsletter service.

Watch and learn firsthand how I implement my options strategies.

Kindest,

Andy

Filed Under Crowder's Daily Market Commentary, RSI, Technical Indicators ·

Daily Short-Term, High-Probability, Mean Reversion Indicator

October 26, 2010

Short-Term, High-Probability, Mean Reversion Indicator – as of close 10/25

I hope that all of you find the following information useful in your trading endeavors. I will be back later with my daily market commentary.

After being deeply oversold on a short-term basis, Brazil (EWZ) bounced back today, and is now sitting comfortably in a neutral state. The ETF gained of $.70 or 0.92%. The at-the-money EWZ Dec10 76 puts had a net change today of $0.55 or 16.4%.

Even after today’s failed rally (considering the highs of the day), there are still a few ETFs that I am watching for a potential trade.

The QQQQ is an obvious one that I have added to my short-term watchlist. The tech-heavy index is on the border of being “very overbought” and has a decent RSI (2) rating above 93. I would prefer to see a higher number (greater than 95), but given how heavy the market currently feels I will be watching this one closely tomorrow.

The other is the Real Estate sector (IYR) as it has pushed into a “very overbought” state. The RSI (2) is not as high as I would like, but I will be watching this one closely nonetheless for a quick decline.

Benchmark ETFs

S&P 500 (SPY) – 69.2 (neutral)
Dow Jones (DIA) – 69.3 (neutral)
Russell 2000 (IWM) – 65.2 (neutral)
NASDAQ 100 (QQQQ) – 79.4 (overbought) / RSI(2) – 93.3

Sector ETFs

Biotech (IBB) –63.2 (neutral)
Consumer Discretionary (XLY) – 75.7 (overbought) / RSI (2) – 91.7
Health Care (XLV) – 68.2 (neutral)
Financial (XLF) – 45.7 (neutral)
Energy (XLE) – 68.6 (neutral)
Gold Miners (GDX) – 48.8 (neutral)
Industrial (XLI) – 67.9 (neutral)
Materials (XLB) – 66.8 (neutral)
Real Estate (IYR) – 80.3 (very overbought) /RSI (2) – 87.8
Retail (RTH) – 66.8 (neutral)
Semiconductor (SMH) – 71.2 (overbought)
United States Oil Fund (USO) – 52.5 (neutral)
Utilities (XLU) – 39.8 (neutral)

International ETFs

Brazil (EWZ) – 36.8 (neutral)
China 25 (FXI) – 62.9 (neutral)
EAFE (EFA) – 60.3 (neutral)
South Korea (EWY) – 42.7 (neutral)

Commodity ETFs

Gold (GLD) – 52.9 (neutral)

Ultra Extremes

Small Cap Bear 3x (TZA) – 33.6(neutral)
Small-Cap Bull 3x (TNA) – 64.1 (neutral)
UltraLong QQQQ (QLD) – 78.1 (overbought)/RSI (2) – 92.1
Ultra Long S&P 500 (SSO) – 69.7 (neutral)
Ultra Short S&P 500 (SDS) – 29.8 (oversold)
UltraShort 20+ Treasury (TBT) – 51.6 (neutral)

I work hard to bring you my latest views, opinions and research on a daily basis. If you are a loyal reader and find my thoughts useful please show your support by joining my newsletter service.

Watch and learn firsthand how I implement my options strategies.

Kindest,

Andy Crowder (www.CrowderOptions.com)

Filed Under Crowder's Daily Market Commentary, Options Portfolio, RSI, Technical Indicators ·

Daily Short-Term, High-Probability, Mean Reversion Indicator

October 22, 2010

Short-Term, High-Probability, Mean Reversion Indicator

I hope that all of you find the following information useful in your trading endeavors. I will be back later with my daily market commentary.

Benchmark ETFs

S&P 500 (SPY) – 64.9 (neutral)
Dow Jones (DIA) – 64.2 (neutral)
Russell 2000 (IWM) – 58.8 (neutral)
NASDAQ 100 (QQQQ) – 75.6 (overbought)

Sector ETFs

Biotech (IBB) –52.2 (neutral)
Consumer Discretionary (XLY) – 70.3 (overbought)
Health Care (XLV) – 60.7 (neutral)
Financial (XLF) – 50.1 (neutral)
Energy (XLE) – 65.7 (neutral)
Gold Miners (GDX) – 37.6 (neutral)
Industrial (XLI) – 63.9 (neutral)
Materials (XLB) – 49.0 (neutral)
Real Estate (IYR) – 78.5 (overbought)
Retail (RTH) – 65.6 (neutral)
Semiconductor (SMH) – 64.2 (neutral)
United States Oil Fund (USO) – 51.2 (neutral)
Utilities (XLU) – 44.9 (neutral)

International ETFs

Brazil (EWZ) – 25.8 (oversold)
China 25 (FXI) – 52.1 (neutral)
EAFE (EFA) – 55.4 (neutral)
South Korea (EWY) – 42.7 (neutral)

Commodity ETFs

Gold (GLD) – 52.9 (neutral)

Ultra Extremes

Small Cap Bear 3x (TZA) – 39. 1(neutral)
Small-Cap Bull 3x (TNA) – 57.2 (neutral)
UltraLong QQQQ (QLD) – 74.7 (overbought)
Ultra Long S&P 500 (SSO) – 63.0 (neutral)
Ultra Short S&P 500 (SDS) – 32.9 (neutral)
UltraShort 20+ Treasury (TBT) – 57.6 (neutral)

I work hard to bring you my latest views, opinions and research on a daily basis. If you are a loyal reader and find my thoughts useful please show your support by joining my newsletter service.

Watch and learn firsthand how I implement my options strategies.

Kindest,

Andy

Filed Under Crowder's Daily Market Commentary, Technical Indicators ·

What you have been longing for has finally come to fruition.

October 21, 2010

Short-Term, High-Probability, Mean Reversion Indicator

Per my loyal readers request, I have decided to publish my daily high-probability, mean reversion indicator. I use this as the foundation for searching for my trades. If I find that a certain market, sector, etc. is moving towards an extreme I will add it to my watchlist over the short-term (1-5 days) to see how it performs. If it reaches an extreme, which I will indicate to my loyal subscribers in a real-time trade alert or in the weekend report, I will place a trade.

Currently, the Gold Miners (GDX) and Brazil (EWZ) have moved into an oversold state, while Real Estate (IYR) is the only overbought ETF. All three are currently on my watchlist, but none of them have reached an extreme state. I would like to see the RSI (2) move below 5 in GDX and EWZ and a RSI (2) reading above 95 in IYR before placing a trade. Again, If we do reach that area I will send out a real-time trade alert to my subscribers.

I hope that all of you find the following information useful in your trading endeavors.

Benchmark ETFs

S&P 500 (SPY) – 62.4 (neutral)
Dow Jones (DIA) – 68.9 (neutral)
Russell 2000 (IWM) – 51.1 (neutral)
NASDAQ 100 (QQQQ) – 69.4 (neutral)

Sector ETFs

Biotech (IBB) – 48.0 (neutral)
Consumer Discretionary (XLY) – 64.9 (neutral)
Health Care (XLV) – 60.2 (neutral)
Financial (XLF) – 50.5 (neutral)
Energy (XLE) – 58.1 (neutral)
Gold Miners (GDX) – 28.5 (oversold)
Industrial (XLI) – 64.5 (neutral)
Materials (XLB) – 57.3 (neutral)
Real Estate (IYR) – 78.3 (overbought)
Retail (RTH) – 63.1 (neutral)
Semiconductor (SMH) – 48.7 (neutral)
United States Oil Fund (USO) – 41.1 (neutral)
Utilities (XLU) – 64.5 (neutral)

International ETFs

Brazil (EWZ) – 29.2 (oversold)
China 25 (FXI) – 65.1 (neutral)
EAFE (EFA) – 52.4 (neutral)
South Korea (EWY) – 42.7 (neutral)

Commodity ETFs

Gold (GLD) – 33.9 (neutral)

Ultra Extremes

Small Cap Bear 3x (TZA) – 46.2 (neutral)
Small-Cap Bull 3x (TNA) – 49.9 (neutral)
UltraLong QQQQ (QLD) – 68.2 (neutral)
Ultra Long S&P 500 (SSO) – 63.0 (neutral)
Ultra Short S&P 500 (SDS) – 36.0 (neutral)
UltraShort 20+ Treasury (TBT) – 68.4 (neutral)

Filed Under Crowder's Daily Market Commentary, Technical Indicators ·

VXX breaking to all-time lows.

October 20, 2010

Was it all a facade? Yesterday, the selling was heavy and historical as the NYSE TICK hit astronomical levels. Panic-selling usually leads to a short-term bounce, but a breach above $118.70 would once again nullify the bearish attempts yesterday. We have seen this type of price action (heavy selling) five days over the past six weeks and all have led to higher prices afterward. However, this time it is different: yesterday’s selling was historical. The NYSE TICK hit levels not seen since the 9/11 crash and the Flash Crash in May. Given the aforementioned and the fact that the next five trading days are historically bearish, I am still sticking with the bears, but my sentiment is strained and I will be exiting if we move up through the $118.70 level on SPY.This could be the first time in quite some time that I have taken such a large loss, but I know that options trading is volatile and I will still be up since My Options Portfolio began back in May. The latter is somewhat comforting, but if I do have to exit my trades with heavy losses I will not be pleased with the outcome. Losses are guaranteed in any trading strategy, but only the person trading the plan is capable of recognizing when to exit the trade when it goes against them. I think this time I might have been fooled by the market and Mr. Probability. How many standard deviations can the market move away from the median before a decent pullback occurs. All indicators state that we are due for a pullback, but sometimes, especially in options, we do not have the time or capital to wait around for the anticipated move.

VXX Chart

Click to Enlarge

I will be back later with more…..stay tuned.

Kindest,

Andy

Kindest,

Andy

Filed Under Crowder's Daily Market Commentary ·

FXI Trade looking up, while SPY and TZA positions still down.

October 19, 2010

The FXI trade that I placed yesterday is showing great promise after the surprise rate hike by China that was announced early this morning. Now if the S&P 500 (SPY) could follow suit it would be a wonderful day.

The gap closed in AAPL so now I think we could begin to see the downturn that we bears have been anticipating. The $116.72 area is still acting as a strong area of support (hit it again this morning) so that would be the first obstacle. If SPY can manage to push through that area then I suspect that we could see a decent move to the downside. However, if the market is able to pick back up and move above the $118.70 area then I think all bearish bets are off.

I have so much to say, but not enough time right now, so stay tuned as I will be back later today with more posts.

Kindest,

Andy

Filed Under Crowder's Daily Market Commentary ·

Post Options Expiration Fallout?

October 18, 2010

After the best advance since 1939, the market has continued its trod higher right into the middle of October and most importantly, options expiration. As expected the advance has once again, pushed the many of the ETFs I trade into a short-term “overbought” state (mentioned in subscribers’ weekly report).

Historically, the trading session (and the week for that matter) following options expiration is overwhelmingly bearish. The odds increase dramatically when the market is in an overbought state. This means that since the market held up this past week (as it usually does pre-expiration) the probability of a move lower on Monday increases substantially.

I currently have an SPY and TZA positions and will be looking at FXE early next week ( as usual subscribers will receive my real-time trade alerts) as the RSI (2) has moved above 96 which typically means that a short-term reprieve is near.

Couple all the above with the fact that we are entering a historically weak seasonal period (next seven out of eight days are historically negative) and I think that the bears could be a happy bunch next week. There is some very strong support at the $116.75 level and again at around $115 on SPY, but if we can break those two levels I would not be surprised top see a move that takes us back down to the 9/13 gap at $111.02. It sounds like a large move, but in reality it is only a 5.6% move. A move that would be not unheard of after the enormous gains over the past month or so.

This could be a decent short-term play. As we all know nothing is certain in the world of trading. A disciplined approach with an appropriate stop-loss goes a long way to your success as a trader. Always define your risk before entering a trade. I should also note that seasonal tendencies have not held up well as of late.

Remember, opportunities are made up easier than losses. So if you let a few pass you by don’t dwell on what could have been. There will always be more opportunities around the corner. Remember, this is a marathon not a sprint.

I work hard to bring you my latest views, opinions and research on a daily basis. If you are a loyal reader and find my thoughts useful please show me your support by joining my newsletter service. Subscribe today for the cost of a daily cup of coffee!

Watch and learn how I implement my options strategies.

Kindest,

Andy

Filed Under Crowder's Daily Market Commentary ·

Rough Road Ahead?

October 13, 2010

Could this chart come to fruition? http://www.etf-corner.com/markets/2010/10/spy-fast-snap-backs-to-the-50-.html

Could Serge’s prediction of a fast and furious decline over the next 5-6 days come true?

Couple the aforementioned with the following study from my favorite analyst, Jason Goepfert of www.sentimentrader.com and I think we could indeed be in for a nice decline over the next few weeks.

Intel’s Earnings

One of the seasonal negatives that we’ve touched on lately is the market’s tendency to fall back soon after Intel releases its quarterly earnings, specifically if the market (meaning the Nasdaq 100) was trading near a multi-month or yearly extreme at the time.

Intel’s earnings beat expectations, and the stock is trading up mildly this morning. The broader market is doing well, too, so let’s refresh the table and look at every time since the mid-1990’s that the Nasdaq 100 was trading within 2% of a 52-week high the day Intel released its earning, then gapped up at least +0.5% the next morning. The table shows returns in the Nasdaq 100 trust (QQQQ) over the next two weeks.

Date Return Max Loss Max Gain
04/14/99 -2.8% -11.8% 3.4%
07/14/99 -2.9% -6.8% 3.1%
01/14/00 -3.6% -10.2% 5.0%
07/16/03 -3.2% -5.7% 0.1%
10/15/03 -1.3% -6.5% 0.1%
10/17/07 2.6% -3.0% 2.7%
10/14/09 -4.0% -4.2% 1.7%
04/14/10 -0.4% -1.4% 2.2%

Median -2.9% -6.1% 2.4%

It should be no surprise that there’s a lot of red in the table. Every instance but one lost at least -3% during the next two weeks, and the maximum risk averaged nearly three times greater than the maximum reward.

The one exception, when QQQQ showed a positive two-week return, was in October 2007. What’s notable is that the 2.6% gain marked the exact closing high for QQQQ. It fell nearly -2% the following day…and nearly -12% in the next two weeks.

Current Positions

There is no doubt that my current positions are underwater, particularly my SPY position. I am looking at hefty losses at the moment, but it is an options portfolio so losses are typically bigger than a regular stock or ETF-based portfolio. However, in hindsight I could have avoided the losses or at least minimized them several weeks ago. I will always be transparent with you, my loyal readers and this time is no different. As I always say, the only guarantee in trading is that losses will occur. My job is to minimize them and I certainly could have done a better job with my most recent trades. Of course, I am still up quite a bit since the portfolio was initiated back in May, but….. Even if the market declines significantly over the next few weeks I am not proud of how I handled my most recent trades.

However, I am still short-term bearish given what Mr. Probability continues to tell me, but as all of you it has been quite the trying ride over the past six or so weeks.

Filed Under Crowder's Daily Market Commentary, Options Portfolio ·