Short-Term High-Probability, Mean-Reversion Indicator. Overbought Readings Continue to Increase.

A few days ago I mentioned the potential for a trade in the Materials sector (XLB) as it had pushed into a “very overbought” extreme. Today, I finally placed the trade in my High-Probability, Mean-Reversion strategy as XLB hit a reading of 99.3.

Again, I am taking advantage of a short-term overbought extreme in the ETF and if we see a pullback over the next 1-3 days the trade should be quite successful. Of course, I will be watching the trade closely and will keep the stop-loss at a reasonable level just in case XLB continues to push higher.

I am still sticking with what I stated last week, going back over the last seven years if you purchased QQQQ on the 8th trading day of January and held until the end of the month, you would have had returns of -2.3%, -3.1%, -2.3%, -2.7%, -4.1% ,-1.6% and -7.7%.  The median maximum gain during those trades was +0.7% compared to a median draw down of -5.3%.

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 12/29/10

Benchmark ETFs

* S&P 500 (SPY) – 77.6 (overbought)
* Dow Jones (DIA) – 65.6 (neutral)
* Russell 2000 (IWM) – 68.6 (neutral)
* NASDAQ 100 (QQQQ) – 63.9 (neutral)

Sector ETFs

* Biotech (IBB) – 64.3 (neutral)
* Consumer Discretionary (XLY) – 53.3 (neutral)
* Financial (XLF) – 70.5 (overbought)
* Energy (XLE) – 82.8 (very overbought)
* Gold Miners (GDX) – 65.2 (neutral)
* Industrial (XLI) – 69.8 (neutral)
* Materials (XLB) – 90.1 (very overbought) / RSI (2) – 99.3
* Real Estate (IYR) – 76.2 (overbought)
* Retail (RTH) – 79.4 (overbought)
* Semiconductor (SMH) – 53.5 (neutral)
* United States Oil Fund (USO) – 67.1 (neutral)
* Utilities (XLU) – 56.7 (neutral)

International ETFs

* Brazil (EWZ) – 65.9 (neutral)
* China 25 (FXI) – 50.1 (neutral)
* EAFE (EFA) – 71.9 (overbought)
* South Korea (EWY) – 79.9 (overbought)

Commodity ETFs

* Gold (GLD) – 78.5 (overbought) / RSI (2) – 95.9

Ultra Extremes

* Small Cap Bear 3x (TZA) – 22.4 (oversold)
* Small-Cap Bull 3x (TNA) – 75.9 (overbought)
* UltraLong QQQQ (QLD) – 66.2 (neutral)
* Ultra Long S&P 500 (SSO) – 85.1(very overbought)
* Ultra Short S&P 500 (SDS) – 15.8 (very oversold)
* UltraShort 20+ Treasury (TBT) – 43.7 (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.

Short-Term High-Probability, Mean-Reversion Indicator. Materials Sector (XLB) Moves Further Into Overbought Territory.

I am still sitting on my hands waiting to take a position. I have mentioned a few key statistics over the past few days and I expect to see these stats come to fruition as we enter 2011.

Yesterday, I mentioned how a position in XLB looked possible. As my subscribers know by now, no position was taken, but that does not mean that I am not still watching the ETF closely for a potential opportunity. Subscribers, you should still be on the lookout for a possible trade alert.

The market remains stagnant as volume and volatility continue to be minimal. This is no surprise, volume and volatility are typically quite low during the last week of the year.

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 12/28/10

Benchmark ETFs

* S&P 500 (SPY) – 76.1 (overbought)
* Dow Jones (DIA) –74.0 (overbought)
* Russell 2000 (IWM) – 64.6 (neutral)
* NASDAQ 100 (QQQQ) – 55.7 (neutral)

Sector ETFs

* Biotech (IBB) – 66.4 (neutral)
* Consumer Discretionary (XLY) – 42.4 (neutral)
* Health Care (XLV) – 57.0 (neutral)
* Financial (XLF) – 76.0 (overbought)
* Energy (XLE) – 73.7 (neutral)
* Gold Miners (GDX) – 62.1 (neutral)
* Industrial (XLI) – 67.1 (neutral)
* Materials (XLB) – 87.1 (very overbought) / RSI (2) – 97.9
* Real Estate (IYR) – 72.0 (overbought)
* Retail (RTH) – 74.0 (overbought)
* Semiconductor (SMH) – 43.8 (neutral)
* United States Oil Fund (USO) – 73.2 (overbought)
* Utilities (XLU) – 73.4 (overbought)

International ETFs

* Brazil (EWZ) – 34.9 (neutral)
* China 25 (FXI) – 28.4 (oversold)
* EAFE (EFA) – 50.2 (neutral)
* South Korea (EWY) – 68.3 (neutral)

Commodity ETFs

* Gold (GLD) – 75.5 (overbought)

Ultra Extremes

* Small Cap Bear 3x (TZA) – 25.5 (oversold)
* Small-Cap Bull 3x (TNA) – 73.2 (overbought)
* UltraLong QQQQ (QLD) – 58.6 (neutral)
* Ultra Long S&P 500 (SSO) – 83.9 (very overbought)
* Ultra Short S&P 500 (SDS) – 17.1 (very oversold)
* UltraShort 20+ Treasury (TBT) – 62.8 (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.

Short-Term High-Probability, Mean-Reversion Indicator. Materials Sector Overbought.

I hope everyone had a wonderful extended holiday. As we enter the last week of 2010, the Materials sector (XLB) has pushed into a short-term overbought state.

Typically, the last week of the year is bullish and I would expect to see much of the same this week. When the stock market has advanced 10% higher headed into the final week of the yea and 3% higher during the final month the S&P 500 is positive 92% (11 out of 12%) of the time.

Going back to the Materials sector (XLB), if the ETF opens up tomorrow there could be a trade in the near future. So, subscribers, be on the lookout for a possible alert tomorrow.

As I stated last week, going back over the last seven years if you purchased QQQQ on the 8th trading day of January and held until the end of the month, you would have had returns of -2.3%, -3.1%, -2.3%, -2.7%, -4.1% ,-1.6% and -7.7%.  The median maximum gain during those trades was +0.7% compared to a median draw down of -5.3%.

If you were unable to check out the results last night here they are: High-Probability, Mean-Reversion ETF Options Strategy

I am going to keep it short tonight. The holidays are here and I am anxious to spend some quality time with my family. I hope all of you have a safe and wonderful holiday weekend.

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 12/23/10

Benchmark ETFs

* S&P 500 (SPY) – 73.2 (overbought)
* Dow Jones (DIA) –68.2 (overbought)
* Russell 2000 (IWM) – 74.3 (overbought)
* NASDAQ 100 (QQQQ) – 65.6 (neutral)

Sector ETFs

* Biotech (IBB) – 88.5 (very overbought)
* Consumer Discretionary (XLY) – 75.9 (overbought)
* Health Care (XLV) – 54.5 (neutral)
* Financial (XLF) – 75.9 (overbought)
* Energy (XLE) – 68.8 (neutral)
* Gold Miners (GDX) – 50.3 (neutral)
* Industrial (XLI) – 70.3 (overbought)
* Materials (XLB) – 85.4 (very overbought) / RSI (2) – 96.0
* Real Estate (IYR) – 68.1 (neutral)
* Retail (RTH) – 72.5 (overbought)
* Semiconductor (SMH) – 56.1 (neutral)
* United States Oil Fund (USO) – 68.1 (neutral)
* Utilities (XLU) – 65.2 (neutral)

International ETFs

* Brazil (EWZ) – 32.7 (neutral)
* China 25 (FXI) – 36.0 (neutral)
* EAFE (EFA) – 46.9 (neutral)
* South Korea (EWY) – 55.2 (neutral)

Commodity ETFs

* Gold (GLD) – 50.3 (neutral)

Ultra Extremes

* Small Cap Bear 3x (TZA) – 14.1 (very oversold)
* Small-Cap Bull 3x (TNA) – 85.3 (very overbought)
* UltraLong QQQQ (QLD) – 67.5 (neutral)
* Ultra Long S&P 500 (SSO) – 82.5 (very overbought)
* Ultra Short S&P 500 (SDS) – 82.5 (very oversold)
* UltraShort 20+ Treasury (TBT) – 39.3 (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. USO Trade Monday?

Yesterday, I mentioned how several of the ETFs that I follow in the High-Probability, Mean-Reversion strategy had moved into a short-term “very overbought” extreme. USO and XLE continued to push further into an extreme state today which will most likely lead to a short-term position in the strategies early next week. If one or both open the week higher I will most likely send out a real-time alert to my loyal subscribers. So, if you are a subscriber stay tuned early next week.

The S&P 500 (SPY) has now advanced 13 out of the past 15 trading days.  This is the first time since 1971 the market has seen a streak like this extend into December.  The other dates were 12/8/59, 12/2/68, 12/7/70 and 12/15/71.  The first two led to almost immediate, and severe declines.  The latter two led to a continued, and impressive rally. We shall see soon enough how this one plays out, but given the move into a short-term “very overbought”

There are a few other bearish indicators that have moved into a short-term extreme which I will mention in my upcoming monthly report.

If you were unable to check out the results last night here they are: High-Probability, Mean-Reversion ETF Options Strategy

I am going to keep it short tonight. The holidays are here and I am anxious to spend some quality time with my family. I hope all of you have a safe and wonderful holiday weekend.

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 12/23/10

Benchmark ETFs

* S&P 500 (SPY) – 72.5 (overbought)
* Dow Jones (DIA) –78.9 (overbought)
* Russell 2000 (IWM) – 70.2 (overbought)
* NASDAQ 100 (QQQQ) – 64.2 (neutral)

Sector ETFs

* Biotech (IBB) – 88.3 (very overbought)
* Consumer Discretionary (XLY) – 57.5 (neutral)
* Health Care (XLV) – 63.3 (neutral)
* Financial (XLF) – 69.2 (neutral)
* Energy (XLE) – 80.4 (very overbought) / RSI (2) – 95.5
* Gold Miners (GDX) – 29.9 (oversold)
* Industrial (XLI) – 67.4 (neutral)
* Materials (XLB) – 84.1 (very overbought)
* Real Estate (IYR) – 58.2 (neutral)
* Retail (RTH) – 75.5 (overbought)
* Semiconductor (SMH) – 48.6 (neutral)
* United States Oil Fund (USO) – 86.0 (very overbought) / RSI (2) – 98.7
* Utilities (XLU) – 63.6 (neutral)

International ETFs

* Brazil (EWZ) – 38.6 (neutral)
* China 25 (FXI) – 37.2 (neutral)
* EAFE (EFA) – 53.7 (neutral)
* South Korea (EWY) – 67.7 (neutral)

Commodity ETFs

* Gold (GLD) – 42.5 (neutral)

Ultra Extremes

* Small Cap Bear 3x (TZA) – 16.1 (very oversold)
* Small-Cap Bull 3x (TNA) – 83.1 (very overbought)
* UltraLong QQQQ (QLD) – 67.4 (neutral)
* Ultra Long S&P 500 (SSO) – 81.6 (very overbought)
* Ultra Short S&P 500 (SDS) – 19.2 (very oversold)
* UltraShort 20+ Treasury (TBT) – 52.9 (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. New Extremes to End 2010.

December has been another good month for the High-Probability, Mean-Reversion strategy. So far, the options strategy is up 8.7% for the month after a 3.7% gain in November (including commissions). Furthermore, the Sharpe ratio is an astounding 3.6 which is amazing. Of course, it has only been two months, but I am truly looking forward to see how the ratio looks four or so months from now. Check out the results here: http://high-probability-etf.collective2.com

This seems to be the pattern for the strategy – slow and steady. I only trade extreme overbought/oversold conditions so the signals are few and far between (roughly 1-3 trades per month), so this is not a strategy for those who wish to trade on a daily basis. It is for those of us who are looking to stay in the game and more importantly, to reap the rewards over the long-term.

The market continues to be in somewhat of a creeper trend which has led to several extreme short-term overbought readings in all of the major market benchmarks, plus a few sectors, namely financials (XLF) and oil (USO).

With that being said, I could possibly send out a signal tomorrow or shortly after the holidays. So, if you are one of my loyal subscribers, be on the lookout for a trade alert over the next day or two.

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 12/22/10

Benchmark ETFs

* S&P 500 (SPY) – 78.8 (overbought)
* Dow Jones (DIA) –76.6 (overbought)
* Russell 2000 (IWM) – 74.2 (overbought)
* NASDAQ 100 (QQQQ) – 77.3 (overbought)

Sector ETFs

* Biotech (IBB) – 87.5 (very overbought)
* Consumer Discretionary (XLY) – 73.4 (overbought)
* Health Care (XLV) – 65.7 (neutral)
* Financial (XLF) – 84.9 (very overbought)
* Energy (XLE) – 78.1 (overbought)
* Gold Miners (GDX) – 28.8 (oversold)
* Industrial (XLI) – 74.1 (overbought)
* Materials (XLB) – 82.0 (very overbought)
* Real Estate (IYR) – 64.5 (neutral)
* Retail (RTH) – 80.4 (very overbought)
* Semiconductor (SMH) – 49.2 (neutral)
* United States Oil Fund (USO) – 80.9 (very overbought)
* Utilities (XLU) – 62.2 (neutral)

International ETFs

* Brazil (EWZ) – 39.8 (neutral)
* China 25 (FXI) – 51.1 (neutral)
* EAFE (EFA) – 55.3 (neutral)
* South Korea (EWY) – 71.9 (overbought)

Commodity ETFs

* Gold (GLD) – 49.2 (neutral)

Ultra Extremes

* Small Cap Bear 3x (TZA) – 12.0 (very oversold)
* Small-Cap Bull 3x (TNA) – 86.9 (very overbought)
* UltraLong QQQQ (QLD) – 82.2 (very overbought)
* Ultra Long S&P 500 (SSO) – 88.7 (very overbought)
* Ultra Short S&P 500 (SDS) – 11.8 (very oversold)
* UltraShort 20+ Treasury (TBT) – 49.1 (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

Trading Systems Owe Their Existence to Statistics and Technical Analysis

Guest contribution provided by ForexTraders.

Technical Analysis is a term that is bandied about in the investment world as a most useful tool, but investors that are not analytically inclined typically pass over learning that much about the topic.  Books and articles alike seem directed to the geek-side of the brain, and once again, most readers will tune out before the first page is read.  Technical jargon is the name of the game, but a general overview is all that is really needed to use these invaluable trading tools.

For those active souls that prefer security, commodity or forex market trading and who “dumb down” when “TA” is mentioned, today’s software tools will do most all of the work for you.  There is no need to have expensive calculators that perform mind-numbing operations.  However, it is best to understand how the calculations are performed in order to understand their constraints and the impact that selected variables may have on the signals provided.

There has been a great deal of attention paid to the run up in both soft and hard commodities in today’s markets.  Gold has set new records, but prices for soft items like cotton or corn have gone through the roof.  The following chart presents the results for a new ETF that focuses on corn futures:

Click image to enlarge:

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There are no less than seven technical indicators presented within this one chart.  In case you did not identify them, here is a list:

1)    Candlestick Formations

2)    20-Day Moving Average

3)    50-Day Moving Average

4)    Bollinger Bands

5)    Commodity Channel Index (CCI)

6)    Relative Strength Index (RSI)

7)    Moving Average Convergence-Divergence (MACD)

Each of these indicators displays a wealth of information, especially when viewed over a number of trading periods (1-day periods in this case), and involves a number of computations, some based on statistics, to generate signals for the trader.  For example, the Bollinger Bands, the two blue lines that border the candlesticks, are a statistical presentation of prior pricing trends.  In this case, the dotted line is a 20-day simple moving average, and the blue lines are placed at two standard deviations of the last ten days of pricing information.

Bollinger Bands can send a “Buy” signal when the lower band is penetrated and a “Sell” signal when the upper boundary is crossed.  As you may also notice, the bands widen and constrict, much like an accordion.  A tightening of the bands is generally indicative of an imminent expanding, a type of leading indicator signal of a trend reversal.  Always remember that the objective of a trader is to identify a new trend early, confirm its voracity, apply a planned approach for market entry, aim to protect against downside risk, and then let your winner run.

The last three items listed are specialized indicators that are designed to suggest an optimum point for entering a position, and then an optimum point for closing the position.  Since indicators can be wrong, it is generally helpful to have confirmation from another indicator. Technical analysis is by no means perfect.  That goal was never the intent, but TA, although based on previous price action with no guarantee of future results, does provide a level of consistency and an advantage for the trader.  Experience helps to improve interpretive skills over time.

Investing for the long term requires talent, but trading in active markets involves high risk and puts a high premium on specialized training. Plenty of forex and stock options trading strategies exist to assist you in both fundamental and technical factors.  There are also many forex news articles out there to aid a “must have” step-by-step trading plan.  The best ones utilize technical analysis for entry and exit signals while also setting risk control stop-loss orders based on consistent analytics

Short-Term High-Probability, Mean-Reversion Indicator. Several ETFs Hit Extreme Readings.

The QQQQ trade in the High-Probability, Mean-Reversion strategy continues to look good. The Q’s finished the day slightly lower which could be a telling sign over the short-term. With SPY and DIA in a short-term “very overbought” state, Mr. Probability is telling us that a short-term reprieve looks likely. Both of the high-liquid ETFs have an RSI (2) that exceeds 99.0 which is a rare event. The last two times we have seen readings like this the market moved lower. However, we also witnessed an occasion earlier in the year, the 3/5 gap to be exact, where the market rallied for several weeks and pushed the RSI levels to astronomical levels. The former looks more probable, but as always, I will keep my stops at a reasonable level just in case QQQQ decides to rally further into short-term overbought territory.

We are indeed experiencing strange times in the market. The market closed higher for the fifth straight day, yet the NYSE TICK, made record lows. The TICk closed the day well below -4000 which is the lowest reading while the major market benchmark, S&P closed higher. In the past when this type of price action occurred the major indice was lower over 25% of the time one month later with a return below 2%.

As I stated yesterday,  over the short-term the bears look like they should have the edge even with the S&P making new highs for the fifth straight session. During the recent advance breadth has been surprisingly low, less than 2 to 1 positive. Typically when this type of price action occurs we will see a decent decline going forward. Actually when digging a little further, when this type of price action and breadth occurred in the past the S&P had a -2.2% return one month later. The last two times this occurred the market moved over 6.5% lower. I am not certain that we will see this type of move occur going forward, but if the market does happen to move lower I would not be surprised to see the 12/1 gap fill which would be $52.42 in the Q’s.

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 12/14/10

Benchmark ETFs

* S&P 500 (SPY) – 99.3 (very overbought) / RSI (2) – 99.3
* Dow Jones (DIA) –84.6 (very overbought) / RSI (2) – 99.4
* Russell 2000 (IWM) – 75.0 (overbought)
* NASDAQ 100 (QQQQ) – 71.6 (overbought)

Sector ETFs

* Biotech (IBB) – 76.9 (overbought)
* Consumer Discretionary (XLY) – 58.7 (neutral)
* Health Care (XLV) – 84.5 (very overbought)
* Financial (XLF) – 68.1 (neutral)
* Energy (XLE) – 66.9 (neutral)
* Gold Miners (GDX) – 59.5 (neutral)
* Industrial (XLI) – 88.8 (very overbought)
* Materials (XLB) – 75.5 (overbought)
* Real Estate (IYR) – 38.7 (neutral)
* Retail (RTH) – 50.3 (neutral)
* Semiconductor (SMH) – 55.0 (neutral)
* United States Oil Fund (USO) – 60.9 (neutral)
* Utilities (XLU) – 70.0 (neutral)

International ETFs

* Brazil (EWZ) – 58.0 (neutral)
* China 25 (FXI) – 49.0 (neutral)
* EAFE (EFA) – 79.2 (overbought)
* South Korea (EWY) – 80.6 (overbought)

Commodity ETFs

* Gold (GLD) – 55.7 (neutral)

Ultra Extremes

* Small Cap Bear 3x (TZA) – 23.4 (oversold)
* Small-Cap Bull 3x (TNA) – 76.0 (overbought)
* UltraLong QQQQ (QLD) – 71.0 (overbought)
* Ultra Long S&P 500 (SSO) – 85.2 (very overbought) / RSI (2) – 99.2
* Ultra Short S&P 500 (SDS) – 14.9 (very oversold) / RSI (2) – 0.8
* UltraShort 20+ Treasury (TBT) – 74.7 (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. 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. Several ETFs Hit Extreme Readings. QQQQ Trade.

It was another day of gains for the major market benchmarks. Short-term, the major indices look a bit frothy. Three out of the four broad market indices remain in an “overbought” to “very overbought” state. The other, QQQQ, reached extreme levels today and as a result I sent out a trade alert to my subscribers. So far, so good. QQQQ moved roughly $.35 lower and the trade is now 7% higher. If all goes well, this will be the third successful trade in the strategy and would put the High-Probability, Mean-Reversion Strategy over 10% since it was initiated back on Nov. 6th.

Tomorrow brings the much anticipated FOMC meeting which should certainly move the markets. Over the short-term the bears look like they should have the edge even with the S&P making new highs for the fourth straight session. During the recent advance breadth has been surprisingly low, less than 2 to 1 positive. Typically when this type of price action occurs we will see a decent decline going forward. Actually when digging a little further, when this type of price action and breadth occurred in the past the S&P had a -2.2% return one month later. The last two times this occurred the market moved over 6.5% lower. I am not certain that we will see this type of move occur going forward, but if the market does happen to move lower I would not be surprised to see the 12/1 gap fill which would be $52.42 in the Q’s.

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 12/09/10

Benchmark ETFs

* S&P 500 (SPY) – 84.6 (very overbought) / RSI (2) – 99.1
* Dow Jones (DIA) –79.1 (overbought) / RSI (2) – 98.1
* Russell 2000 (IWM) – 76.4 (overbought)
* NASDAQ 100 (QQQQ) – 69.4 (neutral)

Sector ETFs

* Biotech (IBB) – 66.1 (neutral)
* Consumer Discretionary (XLY) – 59.7 (neutral)
* Health Care (XLV) – 58.7 (neutral)
* Financial (XLF) – 86.9 (very overbought)
* Energy (XLE) – 78.7 (overbought)
* Gold Miners (GDX) – 61.5 (neutral)
* Industrial (XLI) – 82.5 (very overbought)
* Materials (XLB) – 77.5 (overbought)
* Real Estate (IYR) – 52.5 (neutral)
* Retail (RTH) – 58.9 (neutral)
* Semiconductor (SMH) – 54.5 (neutral)
* United States Oil Fund (USO) – 60.6 (neutral)
* Utilities (XLU) – 65.3 (neutral)

International ETFs

* Brazil (EWZ) – 57.2 (neutral)
* China 25 (FXI) – 51.6 (neutral)
* EAFE (EFA) – 78.1 (overbought)
* South Korea (EWY) – 76.5 (overbought)

Commodity ETFs

* Gold (GLD) – 54.3 (neutral)

Ultra Extremes

* Small Cap Bear 3x (TZA) – 22.3 (oversold)
* Small-Cap Bull 3x (TNA) – 75.9 (overbought)
* UltraLong QQQQ (QLD) – 69.4 (neutral)
* Ultra Long S&P 500 (SSO) – 84.3 (very overbought) – RSI (2) – 98.9
* Ultra Short S&P 500 (SDS) – 15.7 (very oversold)
* UltraShort 20+ Treasury (TBT) – 63.7 (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. Several ETFs Hit Extreme Readings. Potential Trade?

Before I delve into today’s market action I would like to mention the GDX trade yesterday. Last Friday I placed a trade in my High-Probability, Mean-Reversion strategy using GDX as the underlying. GDX had moved into a “very overbought” state and the RSI (2) had pushed above 99 with strong bearish seasonal conditions. As a result, I faded extreme reading with some GDX put in the options strategy and sold to open GDX in the ETF strategy. I closed out the trade yesterday for a 12.3% profit in the options strategy and a 2.4% in the ETF strategy. Again, the High-Probability, Mean-Reversion strategy is broken up into two separate strategies, one using only ETF options and the other using only ETFs.

So, now that we have covered yesterday’s trade let us move on to today’s price action.

The market continued to trade higher today and pushed quite a few of the ETFs I follow in the High-Probability, Mean-Reversion strategy into extreme readings. Notably, XLF, SMH, TNA, and SSO. There are several other ETFs that have moved into an overbought state , but the RSI (2) readings are a bit lower than I would prefer. So, with that being said, I could be placing another trade tomorrow in the strategy. Subscribers, as always, be aware of a potential trade alert tomorrow. I will also be sending out an email tonight describing my thoughts on a potential trade in far greater detail.

I hope all of you have a wonderful night.

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 12/09/10

Benchmark ETFs

* S&P 500 (SPY) – 79.7 (overbought) / RSI (2) – 97.0
* Dow Jones (DIA) –71.3 (neutral)
* Russell 2000 (IWM) – 84.4 (very overbought)
* NASDAQ 100 (QQQQ) – 74.6 (overbought) / RSI (2) – 95.6

Sector ETFs

* Biotech (IBB) – 70.3 (overbought)
* Consumer Discretionary (XLY) – 72.3 (overbought)
* Health Care (XLV) – 58.7 (neutral)
* Financial (XLF) – 85.7 (very overbought) / RSI (2) – 98.7
* Energy (XLE) – 67.1 (neutral)
* Gold Miners (GDX) – 51.4 (neutral)
* Industrial (XLI) – 74.7 (overbought)
* Materials (XLB) – 66.8 (neutral)
* Real Estate (IYR) – 32.3 (neutral)
* Retail (RTH) – 77.5 (overbought)
* Semiconductor (SMH) – 84.4 (very overbought) / RSI (2) – 96.5
* United States Oil Fund (USO) – 64.6 (neutral)
* Utilities (XLU) – 46.4 (neutral)

International ETFs

* Brazil (EWZ) – 31.6 (neutral)
* China 25 (FXI) – 36.4 (neutral)
* EAFE (EFA) – 66.7 (neutral)
* South Korea (EWY) – 73.2 (overbought)

Commodity ETFs

* Gold (GLD) – 46.9 (neutral)

Ultra Extremes

* Small Cap Bear 3x (TZA) – 15.0 (very oversold) / RSI (2) – 2.6
* Small-Cap Bull 3x (TNA) – 86.2 (very overbought) – RSI (2) – 97.5
* UltraLong QQQQ (QLD) – 74.1 (very overbought)
* Ultra Long S&P 500 (SSO) – 79.4 (overbought) – RSI (2) – 96.8
* Ultra Short S&P 500 (SDS) – 20.3 (oversold)
* UltraShort 20+ Treasury (TBT) – 64.7 (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

GDX in the Books

The second trade since concentrating solely on the High-Probability, Mean-Reversion Strategy reaped 12.3%. According to the Collective2 page, the strategy is now up 8.8% since it began back on November 7th (when I started to  the 30-day Free trial). The response has been overwhelming and I will be limiting the subscribers to keep it manageable with emails, etc. So if you want a spot get in while you can!

I do apologize for not adding my High-Probability, Mean-Reversion numbers last night. I was extremely busy with other exciting projects that I think will add significant value to the service in 2011. I can assure you that I will be back tonight with my daily readings.

As for all of my loyal subscribers, I appreciate all of the emails last night. I am glad that many of you benefited from the last few trades. I will be emailing all of you later today with an update, etc.

Kindest,

Andy

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