Short-Term High-Probability, Mean-Reversion Indicator. Waiting Patiently on the Sidelines.

It was the second day of losses for the major indices, but the $117.50 – $118.00 level on the S&P 500 tracking ETF SPY has managed to keep the losses at a reasonable level.

Since the gap down on the 16th, the major benchmark has muddled around this area without the bulls or bears showing much directional conviction. Interestingly enough, I placed my last trade on the 16th and I would imagine until this market shows some direction I will remain patiently on the sidelines.

However, as we all know, the longer the market trades in a tight range the more apt it is for a strong directional move outside of the range. The problem is no one quite knows which direction the market is headed.

There are a few more oversold readings in the ETFs I follow for the High-Probability, Mean-Reversion Strategy, namely Health Care(XLV), Utilities (XLU), and the European Union (EFA), but none of then have been able to move into an extreme reading.

Tomorrow brings the Beige Book so we could see a decent directional move tomorrow afternoon after it is released. If not, I would imagine that the unemployment report due out before the bell Friday will ignite a directional move. At least I hope so.

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Short-Term High-Probability, Mean-Reversion Indicator – as of close 11/30/10

Benchmark ETFs

* S&P 500 (SPY) – 38.8 (neutral)
* Dow Jones (DIA) –33.9 (neutral)
* Russell 2000 (IWM) – 49.8 (neutral)
* NASDAQ 100 (QQQQ) – 38.6 (neutral)

Sector ETFs

* Biotech (IBB) – 35.5 (neutral)
* Consumer Discretionary (XLY) – 48.4 (neutral)
* Health Care (XLV) – 26.2 (oversold)
* Financial (XLF) – 37.8 (neutral)
* Energy (XLE) – 49.7 (neutral)
* Gold Miners (GDX) – 54.9 (neutral)
* Industrial (XLI) – 48.4 (neutral)
* Materials (XLB) – 50.6 (neutral)
* Real Estate (IYR) – 47.5 (neutral)
* Retail (RTH) – 60.7 (neutral)
* Semiconductor (SMH) – 48.8 (neutral)
* United States Oil Fund (USO) – 51.5 (neutral)
* Utilities (XLU) – 27.7 (oversold)

International ETFs

* Brazil (EWZ) – 39.3 (neutral)
* China 25 (FXI) – 35.4 (neutral)
* EAFE (EFA) – 23.3 (oversold)
* South Korea (EWY) – 41.4 (neutral)

Commodity ETFs

* Gold (GLD) – 68.5 (neutral)

Ultra Extremes

* Small Cap Bear 3x (TZA) – 48.6 (neutral)
* Small-Cap Bull 3x (TNA) – 49.8 (neutral)
* UltraLong QQQQ (QLD) – 38.0 (neutral)
* Ultra Long S&P 500 (SSO) – 37.2 (neutral)
* Ultra Short S&P 500 (SDS) – 60.5 (neutral)
* UltraShort 20+ Treasury (TBT) – 31.0 (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. For the first time, I am offering a 30-Day Free Trial.

Watch and learn firsthand how I implement my options strategies.

Kindest,

Andy

Short-Term High-Probability, Mean-Reversion Indicator. Waiting for an Extreme.

As I stated before, the beginning of this week (Monday and Tuesday) are seasonally bearish. Typically, I do not trade based on seasonality, but I do like to pay attention to them as they often assist me when an ETF within my High-Probability, Mean-Reversion Indicator hits an extreme.

Currently, there are only two ETF within my daily list that are oversold, Utilities and the European Union, and neither have moved into an extreme state. So, I am sitting idly by until an ETF that I follow within my strategy hits an extreme.

It has been several weeks (Nov. 16th) since I have had a trade in the High-Probability, Mean-Reversion Strategy. However, as is usually the case , patience pays as the trade made 21.7%.

Admittedly, it has been a slow start since I started the High-Probability, Mean-Reversion Strategy, but the strategy only averages 1-3 trades a month. Moreover, with a trade that exceeds 20% I am completely content with the results so far and am certain that will be plenty of trading opportunities ahead.

As I always say opportunities are made up easier than losses, so I do not mind waiting for a High-Probability set-up, my trading approach is long-term. Remember, this is a marathon and not a sprint.

Anyway, with the ongoing Korean conflict, the Beige Book on Wednesday, the unemployment report out Friday and the uncertainty that surrounds the European debt crisis we could potentially see an extreme this week.

If you haven’t already, don’t forget to sign-up for my Free 30-day trial. Also, for those of you who live on Facebook. You can access my info there as well. Just click on LIKE.

Short-Term High-Probability, Mean-Reversion Indicator – as of close 11/29/10

Benchmark ETFs

* S&P 500 (SPY) – 45.5 (neutral)
* Dow Jones (DIA) –39.1 (neutral)
* Russell 2000 (IWM) – 61.2 (neutral)
* NASDAQ 100 (QQQQ) – 52.6 (neutral)

Sector ETFs

* Biotech (IBB) – 47.6 (neutral)
* Consumer Discretionary (XLY) – 51.5 (neutral)
* Health Care (XLV) – 35.9 (neutral)
* Financial (XLF) – 42.2 (neutral)
* Energy (XLE) – 53.4 (neutral)
* Gold Miners (GDX) – 43.6 (neutral)
* Industrial (XLI) – 52.4 (neutral)
* Materials (XLB) – 50.0 (neutral)
* Real Estate (IYR) – 53.6 (neutral)
* Retail (RTH) – 59.8 (neutral)
* Semiconductor (SMH) – 66.7 (neutral)
* United States Oil Fund (USO) – 69.1 (neutral)
* Utilities (XLU) – 29.5 (oversold)

International ETFs

* Brazil (EWZ) – 43.8 (neutral)
* China 25 (FXI) – 41.8 (neutral)
* EAFE (EFA) – 28.0 (oversold)
* South Korea (EWY) – 38.0 (neutral)

Commodity ETFs

* Gold (GLD) – 51.6 (neutral)

Ultra Extremes

* Small Cap Bear 3x (TZA) – 36.5 (neutral)
* Small-Cap Bull 3x (TNA) – 61.1 (neutral)
* UltraLong QQQQ (QLD) – 52.8 (neutral)
* Ultra Long S&P 500 (SSO) – 44.9 (neutral)
* Ultra Short S&P 500 (SDS) – 53.8 (neutral)
* UltraShort 20+ Treasury (TBT) – 35.5 (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. For the first time, I am offering a 30-Day Free Trial.

Watch and learn firsthand how I implement my options strategies.

Kindest,

Andy

Short-Term High-Probability, Mean-Reversion Indicator. Historical Seasonal Trend Holds True.

The seasonal bullishness that occurs the day before Thanksgiving held true again this year as the S&P advanced 1.5% on low volume. The day after Thanksgiving also is bullish, but as I mentioned in earlier posts the next two days, which would be Monday and Tuesday of next week, are overwhelmingly bullish on a seasonal basis.

Currently, Retail (RTH) and Semiconductors (SMH) are the only two sectors that are displaying an overbought reading, but neither have an RSI (2) that is even above 90. Preferably I like to see a reading above 95 before I will seriously consider stepping into a trade in the High-Probability, Mean-Reversion Strategy.

So, hopefully, Friday brings more of the same low-volume advance which is enough to push a few of the ETFs I follow into an extreme state. If indeed that occurs next week could bring quite a few nice set-ups.

Until then, keep enjoying the holiday!

If you haven’t already, don’t forget to sign-up for my Free 30-day trial. Also, for those of you who live on Facebook. You can access my info there as well. Just click on LIKE.

Short-Term High-Probability, Mean-Reversion Indicator – as of close 11/24/10

Benchmark ETFs

* S&P 500 (SPY) – 54.7 (neutral)
* Dow Jones (DIA) –52.1 (oversold)
* Russell 2000 (IWM) – 69.0 (neutral)
* NASDAQ 100 (QQQQ) – 61.4 (neutral)

Sector ETFs

* Biotech (IBB) – 64.9 (neutral)
* Consumer Discretionary (XLY) – 64.8 (neutral)
* Health Care (XLV) – 48.1 (neutral)
* Financial (XLF) – 42.5 (neutral)
* Energy (XLE) – 58.5 (neutral)
* Gold Miners (GDX) – 54.6 (neutral)
* Industrial (XLI) – 62.6 (neutral)
* Materials (XLB) – 56.2 (neutral)
* Real Estate (IYR) – 58.1 (neutral)
* Retail (RTH) – 70.5 (overbought)
* Semiconductor (SMH) – 79.1 (overbought)
* United States Oil Fund (USO) – 58.6 (neutral)
* Utilities (XLU) – 41.0 (neutral)

International ETFs

* Brazil (EWZ) – 46.4 (neutral)
* China 25 (FXI) – 40.0 (neutral)
* EAFE (EFA) – 41.4 (neutral)
* South Korea (EWY) – 49.2 (neutral)

Commodity ETFs

* Gold (GLD) – 59.4 (neutral)

Ultra Extremes

* Small Cap Bear 3x (TZA) – 29.8 (oversold)
* Small-Cap Bull 3x (TNA) – 68.4 (neutral)
* UltraLong QQQQ (QLD) – 61.3 (neutral)
* Ultra Long S&P 500 (SSO) – 54.3 (neutral)
* Ultra Short S&P 500 (SDS) – 43.7 (neutral)
* UltraShort 20+ Treasury (TBT) – 58.7 (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. For the first time, I am offering a 30-Day Free Trial.

Watch and learn firsthand how I implement my options strategies.

Kindest,

Andy

Happy Thanksgiving!!!

I will be back later tomorrow for my daily High-Probability, Mean-Reversion Indicator. Stay tuned!

Short-Term High-Probability, Mean-Reversion Indicator. A Few Oversold ETFs, But No Extremes.

More uncertainty entered the market today. North and South Korea conflict, more allegations of insider trading and continued concerns plagued the market today and one has to wonder if this market can gain any ground as we move closer and closer to the 2011. Fortunately, I do not concern myself with these types of issues in my trading. The so-called noise does not concern me as much as when the ETFs I follow hit a short-term oversold/overbought extreme.

The High-Probability, Mean-Reversion Indicator was once again successful in pointing out the short-term direction in overbought Retail sector (RTH) as well as the Semiconductors (SMH). After today’s market-wide drubbing, several of the ETFs that I follow have moved into a short-term oversold state, but none of them have yet to display an extreme reading.

The next two trading days are seasonally bullish. Yes, the day before and after Turkey Day are quite bullish, but the two days after that are overwhelmingly bearish.

It is my hope that the market is able to defy the historically seasonal bullishness and move lower tomorrow to push a few of the ETFs I follow into a short-term oversold extreme. If this plays out and I see a few of the ETFs move into an oversold extreme I will be sending out a trade alert to all of my loyal subscribers.

I just wanted to thank all of you for the continued kind words. It seems as though the High-Probability, Mean-Reversion strategy has been a success so far and many of you have been able to take advantage of the indicators that I publish daily. I hope

If you haven’t already, don’t forget to sign-up for my Free 30-day trial. Also, for those of you who live on Facebook. You can access my info there as well. Just click on LIKE.

Short-Term High-Probability, Mean-Reversion Indicator – as of close 11/22/10

Benchmark ETFs

* S&P 500 (SPY) – 32.3 (neutral)
* Dow Jones (DIA) –28.9 (oversold)
* Russell 2000 (IWM) – 49.1 (neutral)
* NASDAQ 100 (QQQQ) – 40.5 (neutral)

Sector ETFs

* Biotech (IBB) – 46.4 (neutral)
* Consumer Discretionary (XLY) – 43.2 (neutral)
* Health Care (XLV) – 30.2 (neutral)
* Financial (XLF) – 24.1 (oversold)
* Energy (XLE) – 42.6 (neutral)
* Gold Miners (GDX) – 53.9 (neutral)
* Industrial (XLI) – 37.4 (neutral)
* Materials (XLB) – 38.2 (neutral)
* Real Estate (IYR) – 35.8 (neutral)
* Retail (RTH) – 51.8 (neutral)
* Semiconductor (SMH) – 65.9 (neutral)
* United States Oil Fund (USO) – 31.1 (neutral)
* Utilities (XLU) – 25.7 (oversold)

International ETFs

* Brazil (EWZ) – 25.8 (oversold)
* China 25 (FXI) – 22.8 (oversold)
* EAFE (EFA) – 25.3 (oversold)
* South Korea (EWY) – 27.6 (oversold)

Commodity ETFs

* Gold (GLD) – 62.3 (neutral)

Ultra Extremes

* Small Cap Bear 3x (TZA) – 48.9 (neutral)
* Small-Cap Bull 3x (TNA) – 48.3 (neutral)
* UltraLong QQQQ (QLD) – 40.6 (neutral)
* Ultra Long S&P 500 (SSO) – 32.0 (neutral)
* Ultra Short S&P 500 (SDS) – 66.9 (neutral)
* UltraShort 20+ Treasury (TBT) – 35.6 (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. For the first time, I am offering a 30-Day Free Trial.

Watch and learn firsthand how I implement my options strategies.

Kindest,

Andy

Short-Term High-Probability, Mean-Reversion Indicator. Semiconductors and Retail Overbought.

As I stated last week, the day after Thanksgiving is historically bearish. Well, for most of the day the historical tendency held true, but as the day progressed the bulls slowly chipped away at the losses and as a result, two out the four major indices (QQQQ and IWM) managed to close the day higher.

Actually, quite a few of the ETFs I follow in my High-Probability, Mean-Reversion Strategy advanced today, but only two managed to reach a short-term overbought extreme: Retail (RTH) and Semiconductors (SMH). Both moved into a short-term overbought territory and the RSI (2) for both pushed above 95. As a result, both on currently on my radar, so subscribers stay tuned tomorrow as you could be receiving a trade alert at the beginning of the trading day.

Tomorrow I will bring you the seasonal chart the surrounds Turkey day.

If you haven’t already, don’t forget to sign-up for my Free 30-day trial. Also, for those of you who live on Facebook. You can access my info there as well. Just click on LIKE.

Short-Term High-Probability, Mean-Reversion Indicator – as of close 11/22/10

Benchmark ETFs

* S&P 500 (SPY) – 53.4 (neutral)
* Dow Jones (DIA) –46.6 (neutral)
* Russell 2000 (IWM) – 62.9 (neutral)
* NASDAQ 100 (QQQQ) – 61.8 (neutral)

Sector ETFs

* Biotech (IBB) – 68.0 (neutral)
* Consumer Discretionary (XLY) – 67.3 (neutral)
* Health Care (XLV) – 53.4 (neutral)
* Financial (XLF) – 32.8  (neutral)
* Energy (XLE) – 64.6 (neutral)
* Gold Miners (GDX) – 60.2 (neutral)
* Industrial (XLI) – 56.1 (neutral)
* Materials (XLB) – 57.2 (neutral)
* Real Estate (IYR) – 42.4 (neutral)
* Retail (RTH) – 73.4 (overbought) / RSI (2) – 95.3
* Semiconductor (SMH) – 77.4 (overbought) / RSI (2) – 95.6
* United States Oil Fund (USO) – 32.6 (neutral)
* Utilities (XLU) – 41.5 (neutral)

International ETFs

* Brazil (EWZ) – 41.0 (neutral)
* China 25 (FXI) – 33.4 (neutral)
* EAFE (EFA) – 44.3 (neutral)
* South Korea (EWY) – 60.9 (neutral)

Commodity ETFs

* Gold (GLD) – 55.3 (neutral)

Ultra Extremes

* Small Cap Bear 3x (TZA) – 34.8 (neutral)
* Small-Cap Bull 3x (TNA) – 61.8 (neutral)
* UltraLong QQQQ (QLD) – 62.6 (neutral)
* Ultra Long S&P 500 (SSO) – 53.0 (neutral)
* Ultra Short S&P 500 (SDS) – 46.4 (neutral)
* UltraShort 20+ Treasury (TBT) – 40.7 (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. For the first time, I am offering a 30-Day Free Trial.

Watch and learn firsthand how I implement my options strategies.

Kindest,

Andy

Short-Term High-Probability, Mean Reversion Indicator. Weakness After Options Expiration?

Options expiration started out with a sharp decline at the open which I thought might just close the gap on SPY at $118.71. The ETF fell as low as $119.25 before rallying to close the end of the week at $120.29.

Historically, the week after options expiration, particularly the trading day immediately following options expiration is quite bearish. While there is no true edge currently, at least according to my High-Probability, Mean-Reversion Indicator, I do think that history will once again repeat itself on Monday. I expect to see a close of the gap early next week and possibly a return to the declines that began on 11/08.

The one thing that could keep this market afloat over the next week or so is the bullishness that surrounds the Thanksgiving holiday. As I have stated numerous times over the years, Turkey Day is bullish the day before and after the holiday and quite bearish the next two days. This could postpone the gap fill a few days ago or it could postpone the decline that began on 11/08, but I think we will see a decent decline fairly soon.

I would like to see a continued advance so that we see an overbought extreme hit a few of the ETFs I follow in the High-Probability, Mean-Reversion Strategy. One thing is certain, I will sit patiently on the sidelines until a signal is triggered.

Currently, the Semiconductors (SMH) and the Retail sector are the closest to being in an overbought state and the RSI (2) has pushed above 90 in both ETFs. A day or two of higher prices would certainly push both into an overbought state and possibly into the extreme state that would trigger a signal. Stay tuned!

If you haven’t already, don’t forget to sign-up for my Free 30-day trial. Also, for those of you who live on Facebook. You can access my info there as well. Just click on LIKE.

Short-Term High-Probability, Mean-Reversion Indicator – as of close 11/19/10

Benchmark ETFs

* S&P 500 (SPY) – 55.1 (neutral)
* Dow Jones (DIA) –49.9 (neutral)
* Russell 2000 (IWM) – 58.1 (neutral)
* NASDAQ 100 (QQQQ) – 51.1 (neutral)

Sector ETFs

* Biotech (IBB) – 62.1 (neutral)
* Consumer Discretionary (XLY) – 62.0 (neutral)
* Health Care (XLV) – 52.6 (neutral)
* Financial (XLF) – 45.3  (neutral)
* Energy (XLE) – 69.2 (neutral)
* Gold Miners (GDX) – 52.0 (neutral)
* Industrial (XLI) – 59.8 (neutral)
* Materials (XLB) – 54.9 (neutral)
* Real Estate (IYR) – 39.8 (neutral)
* Retail (RTH) – 65.8 (neutral)
* Semiconductor (SMH) – 69.1 (neutral)
* United States Oil Fund (USO) – 34.9 (neutral)
* Utilities (XLU) – 32.8 (neutral)

International ETFs

* Brazil (EWZ) – 51.6 (neutral)
* China 25 (FXI) – 35.8 (neutral)
* EAFE (EFA) – 56.6 (neutral)
* South Korea (EWY) – 60.3 (neutral)

Commodity ETFs

* Gold (GLD) – 43.8 (neutral)

Ultra Extremes

* Small Cap Bear 3x (TZA) – 39.7 (neutral)
* Small-Cap Bull 3x (TNA) – 56.9 (neutral)
* UltraLong QQQQ (QLD) – 50.9 (neutral)
* Ultra Long S&P 500 (SSO) – 54.4 (neutral)
* Ultra Short S&P 500 (SDS) – 43.4 (neutral)
* UltraShort 20+ Treasury (TBT) – 46.8 (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. For the first time, I am offering a 30-Day Free Trial.

Watch and learn firsthand how I implement my options strategies.

Kindest,

Andy

Short-Term High-Probability, Mean Reversion Indicator. Back In a Short-Term Neutral State.

Some say that the news of a bailout in Ireland and the better-than-expected Philly Fed report were the reasons behind the surge today. Well, I do find it interesting that the sharp bounce came off of “very oversold” readings (as stated in my post yesterday) in the major market indexes. Also, interestingly enough, for some odd reason the indices managed to stop moving higher once the gaps were closed from 11/16. Sorry for the sarcasm, but this happens more often than not when we see these types of readings and yet, the talking heads mention nothing of the short-term extremes in the market. It amazes me! Oh well, I guess it is to our benefit right?

The gap higher at the open eventually led to a close of the 11/16 gap in the S&P 500 (SPY). Moreover, the bounce led to a neutral reading in all of the ETFs I follow for my High-Probability, Mean-Reversion Strategy.

The gap higher today in SPY has left a gap that would take a move down to $118.71 to close the huge hole that was left in the SPY chart. Most of the ETFs that I follow were left with similar gaps which typically means that a fill should occur sooner than later.

If you haven’t already, don’t forget to sign-up for my Free 30-day trial. Also, for those of you who live on Facebook. You can access my info there as well. Just click on LIKE.

Short-Term High-Probability, Mean-Reversion Indicator – as of close 11/18/10

Benchmark ETFs

* S&P 500 (SPY) – 51.0 (neutral)
* Dow Jones (DIA) – 52.0 (neutral)
* Russell 2000 (IWM) – 54.9 (neutral)
* NASDAQ 100 (QQQQ) – 50.1 (neutral)

Sector ETFs

* Biotech (IBB) – 60.3 (neutral)
* Consumer Discretionary (XLY) – 56.3 (neutral)
* Health Care (XLV) – 51.1 (neutral)
* Financial (XLF) – 45.6  (neutral)
* Energy (XLE) – 63.7 (neutral)
* Gold Miners (GDX) – 49.2 (neutral)
* Industrial (XLI) – 56.5 (neutral)
* Materials (XLB) – 47.6 (neutral)
* Real Estate (IYR) – 34.5 (neutral)
* Retail (RTH) – 54.3 (neutral)
* Semiconductor (SMH) – 60.1 (neutral)
* United States Oil Fund (USO) – 38.6 (neutral) / RSI (2) – 2.8
* Utilities (XLU) – 39.0 (neutral)

International ETFs

* Brazil (EWZ) – 51.0 (neutral)
* China 25 (FXI) – 41.5 (neutral)
* EAFE (EFA) – 56.6 (neutral)
* South Korea (EWY) – 55.3 (neutral)

Commodity ETFs

* Gold (GLD) – 42.7 (neutral)

Ultra Extremes

* Small Cap Bear 3x (TZA) – 42.9 (neutral)
* Small-Cap Bull 3x (TNA) – 53.7 (neutral)
* UltraLong QQQQ (QLD) – 49.9 (neutral)
* Ultra Long S&P 500 (SSO) – 50.9 (neutral) / RSI (2) – 2.9
* Ultra Short S&P 500 (SDS) – 47.4 (neutral) / RSI (2) – 96.1
* UltraShort 20+ Treasury (TBT) – 54.0 (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. For the first time, I am offering a 30-Day Free Trial.

Watch and learn firsthand how I implement my options strategies.

Kindest,

Andy

Short-Term High-Probability, Mean Reversion Indicator. The Dow Still “Very Oversold”. Short-Term Bounce?

Sorry for the late post. It has been a bit hectic around here as the emails keep coming. The response to my High-Probability, Mean-Reversion Strategy has been overwhelming and I just wanted to thank all of you for the continued support and kinds words.

DIA and USO are both in extreme oversold states. As a result, I would expect to see a short-term bounce. I plan on taking advantage of this set-up if one or both open lower or flat tomorrow. I would prefer to see a lower reading in USO, but the RSI (2) is low enough to trigger a signal especially if the ETF opens up lower tomorrow.

Unless something major happens overnight I would expect to see a higher open in both ETFs, as the futures are significantly higher as I am writing this post.

So, I suppose I will be patiently waiting on the sidelines for another set-up if the USO and DIA trigger does not come to fruition. Oh well, as I always say, opportunities are made up easier than losses.

Could we see one last mini-rally to close the most recent gap before the real decline occurs. I still think before this market can truly take off we will need to see a few of the gaps below close. It could be a few months or a few weeks, but I do think the decline to close the gaps will eventually come.

If you haven’t already, don’t forget to sign-up for my Free 30-day trial. Also, for those of you who live on Facebook. You can access my info there as well. Just click on LIKE.

Short-Term High-Probability, Mean-Reversion Indicator – as of close 11/17/10

Benchmark ETFs

* S&P 500 (SPY) – 21.7 (oversold)
* Dow Jones (DIA) – 17.5 (very oversold) / RSI (2) – 2.6
* Russell 2000 (IWM) – 30.6 (neutral)
* NASDAQ 100 (QQQQ) – 23.5 (oversold)

Sector ETFs

* Biotech (IBB) – 35.9 (neutral)
* Consumer Discretionary (XLY) – 44.0 (neutral)
* Health Care (XLV) – 19.5 (very oversold)
* Financial (XLF) – 29.2  (oversold)
* Energy (XLE) – 42.7 (neutral)
* Gold Miners (GDX) – 37.7 (neutral)
* Industrial (XLI) – 24.2 (oversold)
* Materials (XLB) – 25.3 (oversold)
* Real Estate (IYR) – 26.7 (oversold)
* Retail (RTH) – 35.0 (neutral)
* Semiconductor (SMH) – 37.6 (neutral)
* United States Oil Fund (USO) – 20.1 (oversold) / RSI (2) – 2.8
* Utilities (XLU) – 20.5 (oversold)

International ETFs

* Brazil (EWZ) – 21.8 (oversold)
* China 25 (FXI) – 19.4 (very oversold)
* EAFE (EFA) – 27.5 (oversold)
* South Korea (EWY) – 29.1 (oversold)

Commodity ETFs

* Gold (GLD) – 26.2 (oversold)

Ultra Extremes

* Small Cap Bear 3x (TZA) – 67.6 (neutral)
* Small-Cap Bull 3x (TNA) – 30.2 (neutral)
* UltraLong QQQQ (QLD) – 21.4 (oversold)
* Ultra Long S&P 500 (SSO) – 20.6 (oversold) / RSI (2) – 2.9
* Ultra Short S&P 500 (SDS) – 78.1 (overbought) / RSI (2) – 96.1
* UltraShort 20+ Treasury (TBT) – 58.4 (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. For the first time, I am offering a 30-Day Free Trial.

Watch and learn firsthand how I implement my options strategies.

Kindest,

Andy

Short-Term High-Probability, Mean Reversion Indicator. Can You Say, “OVERSOLD”? Also TBT and FXI Trade Update.

Today’s plunge occurred on the back of  fears in Ireland and interest rate hikes in China. However, the sharp decline has left all of the major indices and quite a few of the ETFs I follow in an “oversold” to “very oversold” state.

So, what exactly does that mean? Well, it means that the probability of a short-term bounce has increased dramatically. Just look a t the S&P (SPY) and Nasdaq 100 (QQQQ). Both have RSI (2) readings below 2 which is extremely rare. Typically, the S&P only reaches this low of a reading during a handful of days each year and almost every time the major market bounces back over the short-term (1-3 days). I expect to see much of the same this time around. However, I do feel like a short pop will turn into a steeper decline that closes the gap established on 9/13. Of course only time will tell and quite honestly it doesn’t matter where SPY goes over the intermediate-term as my High-Probability, Mean-Reversion Strategy does not concern itself with those types of moves.

I was actually able to get out of several trades today at the open. After a few losses in SPY, it was nice to reap some gains in FXI and TBT. The FXI and TBT trade made 54.0% and 21.7%, respectively. The TBT trade was the first in my High-Probability, Mean Reversion Options and ETF strategies.

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Short-Term High-Probability, Mean-Reversion Indicator – as of close 11/16/10

Benchmark ETFs

* S&P 500 (SPY) – 20.4 (oversold) / RSI (2) – 1.8
* Dow Jones (DIA) – 17.9 (very oversold) / RSI (2) – 2.7
* Russell 2000 (IWM) – 26.2 (oversold) / RSI (2) – 3.6
* NASDAQ 100 (QQQQ) – 17.1 (very oversold) / RSI (2) – 1.7

Sector ETFs

* Biotech (IBB) – 30.2 (neutral)
* Consumer Discretionary (XLY) – 27.7 (oversold) / RSI (2) – 3.6
* Health Care (XLV) – 14.4 (oversold) / RSI (2) – 3.0
* Financial (XLF) – 33.1 (neutral)
* Energy (XLE) – 37.4 (neutral)
* Gold Miners (GDX) – 33.1 (neutral)
* Industrial (XLI) – 22.4 (oversold)
* Materials (XLB) – 25.4 (oversold)
* Real Estate (IYR) – 16.9 (very oversold) / RSI (2) – 2.2
* Retail (RTH) – 24.9 (oversold) / RSI (2) – 2.5
* Semiconductor (SMH) – 30.6 (neutral)
* United States Oil Fund (USO) – 26.0 (oversold)
* Utilities (XLU) – 20.9 (oversold)

International ETFs

* Brazil (EWZ) – 22.8 (oversold)
* China 25 (FXI) – 18.1 (very oversold) / RSI (2) – 2.6
* EAFE (EFA) – 17.5 (very oversold) / RSI (2) – 1.1
* South Korea (EWY) – 22.8 (oversold) / RSI (2) – 3.5

Commodity ETFs

* Gold (GLD) – 28.4 (oversold)

Ultra Extremes

* Small Cap Bear 3x (TZA) – 71.9 (overbought)
* Small-Cap Bull 3x (TNA) – 25.3 (oversold)
* UltraLong QQQQ (QLD) – 14.8 (very oversold) / RSI (2) – 1.1
* Ultra Long S&P 500 (SSO) – 20.3 (oversold) / RSI (2) – 1.8
* Ultra Short S&P 500 (SDS) – 78.6 (overbought)
* UltraShort 20+ Treasury (TBT) – 54.4 (neutral)

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Kindest,

Andy

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