April 24, 2017

Archives for January 2011

Short-Term High-Probability, Mean-Reversion Indicator – Bounce for Brazil (EWZ)?

The market moved lower today and as a result most of the ETFs that I follow in the High-Probability, Mean-Reversion strategy have moved into a neutral state.As reported by Jason Goepfert over at SentimenTrader, today marked the first time since 1980 that the S&P hit a 52-week then closed at a 10-day low one trading day after. This has happened 8 other times and 7 out of 8 have been negative a month later with an average return of approximately -4.5%. Health Care (XLV) , Brazil (EWZ) and China (FXI) have all moved into a "very oversold" state, but the only one that currently has an RSI (2) below 5 is EWZ (2.9). Both EWZ and FXI are borderline right now, but a push lower at the open Monday would surely bring the RSI (2) of both below … [Read more...]

Short-Term High-Probability, Mean-Reversion Indicator – USO Trade Success, Strategy Up 22.5%

Yesterday, USO had moved into an extreme short-term oversold state and as a result, I placed a trade in the High-Probability, Mean-Reversion strategy. Today I was able to get out of the trade towards the end of the day for a gain of 7.9%. So far the strategy is up 6.5% for the month and 22.5% since its inception roughly 3 months ago. The strategy is averaging a monthly gain of 6.6%. This is right on track with my expectations of 5.0% a month.Moreover,  the Sharpe ratio is 3 with a max drawdown of only 8.6%. To say I am happy with the performance of the newsletters  strategy would be an understatement. By the way, did you see what GDX did today. The ETF was in a short-term "very oversold" extreme with an RSI (2) of 4.4 and bounced … [Read more...]

Short-Term High-Probability, Mean-Reversion Indicator – China, Gold and Oil Have Hit Short-Term Oversold Extreme

Yesterday I mentioned the possibility of entering into a DIA position but the trade was contingent on how the Dow (DIA) opened the trading day. DIA opened lower which pushed the RSI (2) significantly lower so the DIA trade was immediately off the table. However, the continued collapse in China (FXI) , Gold (GDX and GLD) and more importantly, USO brought about some interesting set-ups as the trading day progressed. Towards the end of the day USO had hit a short-term (1-3 days) "very oversold" extreme with a astonishingly low RSI (2) of 0.5. Typically when readings hit this type of low a short-term bounce occurs. As a result of the low short-term readings I decided to take a position in USO towards the end of the day. You can check out … [Read more...]

Short-Term Reprieve in the DIA

Last week I mentioned the probability of a short-term decline in the Nasdaq 100 (QQQQ) due to the bearish seasonality, but more importantly the short-term "very overbought" state of the tech-heavy index. By Friday, QQQQ had pushed to a short-term "oversold" state. However, the Dow (DIA) advanced and actually ended up slightly higher for the week. It was the only major benchmark to close the week higher. Moreover, it was the eight straight week of gains for the blue-chip index. The trading day after options expiration is historically bearish, but given the short-term oversold nature of QQQQ, I was not certain how much further the tech-heavy index could decline over the short-term particularly with a RSI (2) of roughly 4. Today QQQQ, as … [Read more...]

Once Again, Patience Pays

So, as expected the market, or more specifically, the tech-heavy Nasdaq 100 (QQQQ) declined today to further extend the short-term decline that I have mentioned over the past few days. As a result, the QQQQ trade in the newsletters High-Probability, Mean-Reversion strategy made 5.8% and is now up 19.4% since it was initiated back in mid November of last year. The monthly gains since it started have been a consistent 3.7%, 9.6% and so far 4.0% in January. You can check out the gains and the trades at the following link. Please keep in mind that the drawdown on the 14th did not occur. Collective2 is working to fix this. The QQQQ trade that was on did not even represent 30% of the overall portfolio yet they are showing a drawdown of over … [Read more...]

Short-Term Extremes Reach Historical Levels

The market has reached a short-term technical extreme. Actually, that could be an understatement. Almost every short to intermediate-term indicator that I know of has moved into a bearish stance with only the InsiderScore.com Buy/Sell Ratio still bullish. Yes, over 30 indicators ranging from liquidity premiums to various sentiment and put/call ratios have pushed into a bearish state yet nothing seems to phase the market at the moment. Couple the aforementioned with a plethora of short-term overbought readings in almost every ETF that I follow in the High-Probability, Mean-Reversion strategy and the short-term bears should be out in full force soon. It is certainly rare to see a RSI (2) reading in one of the four major market benchmarks move … [Read more...]

Short-Term High-Probability, Mean-Reversion Indicator. Tech-Heavy ETF Hits Short-Term Extreme.

It was just another day in the park for the bulls. The continued push since the gap higher on 1/3 has  managed to push the tech-heavy QQQQ into a short-term "very overbought" extreme with an RSI (2) at 98.4. As I always state, when an ETF typically reaches an extreme of this manner the market fades over the short-term (1-3 days). A move that pushes QQQQ lower would likely close the gap at $54.62 which would mean a 3.5% loss for the QQQQ. A move like this would certainly be advantageous for my current open positions in both of the High-Probability, Mean -Reversion strategy. Yes, I took a position later in the afternoon in the tech-heavy index  and so far I like the probability on this one. All of the short-term technical indicators that I … [Read more...]

Short-Term High-Probability, Mean-Reversion Indicator. QQQQ – Short-Term Fade?

First of all I would like to apologize for the short reprieve. I have been ill for several weeks now, but things got worse last week as I fell ill with the flu. After being reminded just how awful the flu can make you feel I think I might consider actually getting a shot next year. Also, as an Oregon Duck alum and long time fan, I was certainly not enthused by the result of the game last night. It is great to see just how far the program has come over the years. Just like my High-Probability, Mean-Reversion strategy, patience and persistence pays. We will be back. Go PAC-10 and Go Ducks!!! Okay, now with QQQQ pushing into "very overbought" territory with the eighth day of trading in January behind us could the following occur: going … [Read more...]

Short-Term High-Probability, Mean-Reversion Indicator. Short-Term Reprieve Around the Corner?

Over the past few days Jason Goepfert has put out some astounding statistics. He is an awesome analyst and the following stats go to show just how helpful his research is for traders. Today he stated that the S&P is about to hit the worst of January seasonality. Typically, seasonality does not play into my trading, but given the short-term "very overbought" extremes in most of the ETFs I follow, I think the current seasonal conditions could act as a strong breeze for the bearish camp. Just look at the current short-term extremes in the major benchmarks. DIA and SPY are "very overbought" and have RSI (2) readings above 95. In most cases, when we see this type of short-term set-up the market is due for a short-term reprieve. I was able … [Read more...]

Short-Term High-Probability, Mean-Reversion Indicator. Reprieve in EWY?

As I stated earlier, the High-Probability, Mean-Reversion strategy reaped its first gain of 2011 today as it made 13.8% on the recent XLB trade. So far, since HPMR was established back in early November 2010, the strategy has advanced 16.8%. As I state on the site, patience is the key ingredient to the success of my strategy and forcing a trade is, in most cases, detrimental to any strategy. The strategy requires patience coupled with a disciplined approach. Waiting for the appropriate scenario to recommend trades with a high probability of success is what makes my High-Probability, Mean-Reversion strategy successful. Here are the stats. Just look at that Sharpe ratio. http://high-probability-etf.collective2.com The South … [Read more...]