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

January 29, 2011

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 5.

Indeed, if the market opens lower Monday and EWZ, FXI and EWZ follow suit there could be another trade signal in the High-Probability, Mean-Reversion strategy. Subscribers stay tuned.

It was another good week for the strategy. I was able to get out of the USO trade towards the end of the day Wednesday for a gain of 7.9%. 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 currently over 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.

You can check out the results here: http://high-probability-etf.collective2.com

As always, if you have any questions or comments please do not hesitate to email me.

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 daily info there as well. Just click on LIKE

Short-Term High-Probability, Mean-Reversion Indicator – as of close 1/28/11

Benchmark ETFs

* S&P 500 (SPY) – 33.8 (neutral)
* Dow Jones (DIA) 35.3 (neutral)
*Russell 2000 (IWM) – 35.0 (neutral)
* NASDAQ 100 (QQQQ) – 35.2 (neutral)

Sector ETFs

*Biotech (IBB) – 28.6 (oversold)
* Consumer Discretionary (XLY) – 26.0 (oversold)
* Health Care (XLV) – 18.8 (very oversold)
* Financial (XLF) – 37.0 (neutral)
* Energy (XLE) – 59.8 (neutral)
* Gold Miners (GDX) – 44.6 (neutral)
* Industrial (XLI) – 40.7 (neutral)
* Materials (XLB) – 39.2 (neutral)
*Real Estate (IYR) – 56.1 (neutral)
* Retail (RTH) – 35.7 (neutral)
* Semiconductor (SMH) – 52.9 (neutral)
* United States Oil Fund (USO) – 55.3 (neutral)
* Utilities (XLU) – 33.9 (neutral)

International ETFs

* Brazil (EWZ) – 17.3 (very oversold)
* China 25 (FXI) – 17.9 (very oversold)
* EAFE (EFA) – 37.4 (neutral)
* South Korea (EWY) – 38.9 (neutral)

Commodity ETFs

* Gold (GLD) – 44.8 (neutral)

Ultra Extremes

* Small Cap Bear 3x (TZA) – 63.1 (neutral)
* Small-Cap Bull 3x (TNA) – 34.2 (neutral)
*UltraLong QQQQ (QLD) – 35.0 (neutral)
* Ultra Long S&P 500 (SSO) – 33.6 (neutral)
* Ultra Short S&P 500 (SDS) – 65.5 (neutral)
* UltraShort 20+ Treasury (TBT) – 44.7 (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

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

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

January 27, 2011

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 today $1.98 or 3.73%. Buying slightly in-the-money calls, 53 strike to be exact, towards the end of the day would have reaped a nice $1.20 on a $4.40 option or 30%. I hope some of you were able to take advantage of the short-term “very oversold” reading in GLD today.

As for the current state of the market, well, I would expect to see a short-term reprieve in the lower-beta DIA and SPY over the short-term (1-3 days). While DIA looks nice because of the extreme overbought nature (87.9) of the ETF, I am more interested in IYR because it is the only ETF that currently has an RSI (2) reading above 5.

If both open up higher tomorrow there could be another trade in the newsletter’s flagship High-Probability, Mean-Reversion strategy. As always, subscribers 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 daily info there as well. Just click on LIKE

Short-Term High-Probability, Mean-Reversion Indicator – as of close 1/25/10

Benchmark ETFs

* S&P 500 (SPY) – 74.7 (overbought)
* Dow Jones (DIA) 87.9 (very overbought)
*Russell 2000 (IWM) – 60.0 (neutral)
* NASDAQ 100 (QQQQ) – 64.8 (neutral)

Sector ETFs

*Biotech (IBB) – 64.9 (neutral)
* Consumer Discretionary (XLY) – 68.9 (neutral)
* Health Care (XLV) – 45.9 (neutral)
* Financial (XLF) – 48.7 (neutral)
* Energy (XLE) – 77.5 (overbought)
* Gold Miners (GDX) – 52.4 (neutral)
* Industrial (XLI) – 76.0 (overbought)
* Materials (XLB) – 66.5 (neutral)
*Real Estate (IYR) – 78.6 (overbought) / RSI (2) – 95.2
* Retail (RTH) – 71.2 (overbought)
* Semiconductor (SMH) – 66.9 (neutral)
* United States Oil Fund (USO) – 51.3 (neutral)
* Utilities (XLU) – 57.4 (neutral)

International ETFs

* Brazil (EWZ) – 36.8 (neutral)
* China 25 (FXI) – 35.1 (neutral)
* EAFE (EFA) – 72.5 (overbought)
* South Korea (EWY) – 63.5 (neutral)

Commodity ETFs

* Gold (GLD) – 39.5 (neutral)

Ultra Extremes

* Small Cap Bear 3x (TZA) – 38.1 (neutral)
* Small-Cap Bull 3x (TNA) – 58.9 (neutral)
*UltraLong QQQQ (QLD) – 64.8 (neutral)
* Ultra Long S&P 500 (SSO) – 73.9 (neutral)
* Ultra Short S&P 500 (SDS) – 32.4 (neutral)
* UltraShort 20+ Treasury (TBT) – 58.6 (neutral)

Watch and learn firsthand how I implement my options strategies.

Kindest,

Andy

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

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

January 25, 2011

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 the trade here: http://high-probability-etf.collective2.com

Collective2 has yet to fix the drawdown issue from 1/14 which is a bit frustrating. The drawdown (which is a software glitch in their reporting) should be fixed soon. Hopefully, it will be within the next few days.

Anyway, the next few days should be quite interesting as the Fed meet over the next two days and come out with their rate decision on Wednesday. While a hike is most likely not in the cards, more transparency is expected so it could be a wild ride once the report comes out.

As I mentioned before, Gold has taken a tumble as of late and as a result GDX and GLD have pushed into “very oversold” territory. Over the past year, gold has performed extremely well surrounding the Fed meetings. So much so that the days surrounding the FOMC meetings gold has been higher from the day before the announcement to the day after 6 out of the last 7 times. Five of those occurrences saw gains in excess of 1%.

Given the recent oversold nature of the precious metal I would expect to see a short-term bounce over the next 1-3 days. I will be keeping a close eye on GLD and GDX to see if they both push lower over the next few days. If they do, then I would anticipate another trade in the High-Probability, Mean-Reversion strategies.

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 daily info there as well. Just click on LIKE

Short-Term High-Probability, Mean-Reversion Indicator – as of close 1/25/10

Benchmark ETFs

* S&P 500 (SPY) – 67.7 (neutral)
* Dow Jones (DIA) 87.1 (very overbought)
*Russell 2000 (IWM) – 38.0 (neutral)
* NASDAQ 100 (QQQQ) – 57.6 (neutral)

Sector ETFs

*Biotech (IBB) – 48.6 (neutral)
* Consumer Discretionary (XLY) – 65.1 (neutral)
* Health Care (XLV) – 52.3 (neutral)
* Financial (XLF) – 50.4 (neutral)
* Energy (XLE) – 55.7 (neutral)
* Gold Miners (GDX) – 16.1 (very oversold) / RSI (2) – 4.4
* Industrial (XLI) – 69.5 (neutral)
* Materials (XLB) – 42.7 (neutral)
*Real Estate (IYR) – 76.2 (overbought)
* Retail (RTH) – 68.1 (neutral)
* Semiconductor (SMH) – 61.6 (neutral)
* United States Oil Fund (USO) – 13.1 (very oversold) / RSI (2) – 0.5
* Utilities (XLU) – 74.7 (overbought)

International ETFs

* Brazil (EWZ) – 36.6 (neutral)
* China 25 (FXI) – 21.7 (very oversold) / RSI (2) – 2.2
* EAFE (EFA) – 65.8 (neutral)
* South Korea (EWY) – 44.1 (neutral)

Commodity ETFs

* Gold (GLD) – 18.7 (very oversold) / RSI (2) – 4.4

Ultra Extremes

* Small Cap Bear 3x (TZA) – 60.1 (neutral)
* Small-Cap Bull 3x (TNA) – 36.8 (neutral)
*UltraLong QQQQ (QLD) – 56.7 (neutral)
* Ultra Long S&P 500 (SSO) – 66.5 (neutral)
* Ultra Short S&P 500 (SDS) – 32.4 (neutral)
* UltraShort 20+ Treasury (TBT) – 38.1 (neutral)

Watch and learn firsthand how I implement my options strategies.

Kindest,

Andy

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

Short-Term Reprieve in the DIA

January 25, 2011

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 well as the rest of the market, bounced which as I mentioned was not unexpected. The advance has left the already short-term “overbought” Dow (DIA) to a short-term “very overbought” reading and a RSI (2) of 98.3.

After both hit 52-week highs two weeks ago there has been a recent divergence between DIA and QQQQ and this price action could be telling over the short-term. Typically this spells trouble for the market over the short-term . This same type of price action has happened three times over the past thirty years and each time the market moved lower with an average loss of 3.6% over the next two months. Couple the aforementioned with the recent jump in CFSB (Fear Barometer) and the VIX (both suggest a short-term reprieve) and I think the argument for a short-term reprieve in the blue-chip DIA could easily be made.

Of course, as we all know there are no guarantees in trading, but with a short-term oversold reading in my High-Probability, Mean-Reversion indicator coupled with a RSI (2) of 98.3 there is a good chance that I could place another trade in the High-Probability, Mean-Reversion indicator tomorrow. As always, I will send out an alert to subscribers if/when a trade occurs in the newsletter’s strategy.

Until then have a great night. I will be back with the High-Probability, Mean-Reversion readings tomorrow. For some reason my software is giving wacky readings tonight.

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 daily info there as well. Just click on LIKE

Kindest,

Andy

Filed Under Crowder's Daily Market Commentary ·

Once Again, Patience Pays

January 20, 2011

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 37%. This should be fixed shortly. However, the performance stats are correct.

High-Probability, Mean-Reversion Strategy Performance Results

So once again patience pays. The strategy has had 5 successful trades over the last 75 days, yet some subscribers continue to complain about the lack of trading. As Charles Kirk stated in his post Lessons from 2010, “Less is more. Learn one “bread and butter” strategy and trade the hell out of it.”

Most seasoned traders already know this little tidbit of information. Yet, greed and the excitement of trading frequently gets the best of both seasoned traders and newbies alike. I mean, brokers want you to trade more frequently. If everyone traded less than that would obviously mean less commissions for the almighty broker.

One thing is certain, I will not trade to trade. I have come to far and spent too many years learning the ropes to fall prey to a few subscribers need to trade more often. I kindly say that this system is obviously not for them and move on. Yes, I lose quite a few subscribers this way, but I truly believe in my system. It is not the holy grail, there isn’t one, but after years of trading this system I do know the ins and outs of how to trade this system and best of all, trade it effectively over the long-term. As the link states above – the performance speaks for itself.

As for the current state of the market, well, options expiration is tomorrow so anything goes. USO is the only ETF that I follow in the High-Probability, Mean-Reversion strategy that has reached a short-term extreme, but I would prefer to see further declines in the ETF before taking a position. Currently, I am sitting on the sidelines waiting patiently for another high-probability set-up.

Until then – 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 daily info there as well. Just click on LIKE

Short-Term High-Probability, Mean-Reversion Indicator – as of close 1/20/10

Benchmark ETFs

* S&P 500 (SPY) – 45.7 (neutral)
* Dow Jones (DIA) 69.6 (neutral)
* Russell 2000 (IWM) – 26.0 (oversold)
* NASDAQ 100 (QQQQ) – 39.9 (neutral)

Sector ETFs

*Biotech (IBB) – 38.4 (neutral)
* Consumer Discretionary (XLY) – 48.4 (neutral)
* Health Care (XLV) – 52.3 (neutral)
* Financial (XLF) – 42.7 (neutral)
* Energy (XLE) – 48.3 (neutral)
* Gold Miners (GDX) – 24.6 (oversold)
* Industrial (XLI) – 47.3 (neutral)
* Materials (XLB) – 23.5 (oversold)
*Real Estate (IYR) – 51.2 (neutral)
* Retail (RTH) – 66.5 (neutral)
* Semiconductor (SMH) – 53.1 (neutral)
* United States Oil Fund (USO) – 27.0 (oversold) / RSI (2) – 4.5
* Utilities (XLU) – 77.5 (overbought)

International ETFs

* Brazil (EWZ) – 33.9 (neutral)
* China 25 (FXI) – 34.5 (neutral)
* EAFE (EFA) – 52.5 (neutral)
* South Korea (EWY) – 52.6 (neutral)

Commodity ETFs

* Gold (GLD) – 27.1 (oversold)

Ultra Extremes

* Small Cap Bear 3x (TZA) – 73.1 (overbought)
* Small-Cap Bull 3x (TNA) – 26.1 (oversold)
*UltraLong QQQQ (QLD) – 40.6 (neutral)
* Ultra Long S&P 500 (SSO) – 45.9 (neutral)
* Ultra Short S&P 500 (SDS) – 52.4 (neutral)
* UltraShort 20+ Treasury (TBT) – 65.9 (neutral)

Watch and learn firsthand how I implement my options strategies.

Kindest,

Andy

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

Short-Term Extremes Reach Historical Levels

January 19, 2011

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 over 99.0 which has been accomplished by the tech-heavy QQQQ with an astounding reading of 99.8.

On Friday, the Equity-Only Put/Call Ratio moved approximately 30% away from its six month average. There have been twenty-one other occurrences when the S&P has pushed to a one-year high while the S&P has moved 30% away from its six-month average and all but one saw losses of over 3% over the next few weeks. Over the next month the average losses were even greater at -4.2%. Yes, just another indicator that is stating a bearish move should occur over the short-term, yet again, nothing and I mean nothing, not even the news of Steve Jobs taking a leave of absence from Apple can push this market lower.

So with that being said, we are at a pivotal point in the market, at least over the short-term. The QQQQ position in the High-Probability, Mean-Reversion strategy is currently in the red, but one day of sharp declines would put the position back in the black and if we do see a move lower I think it will last for more than one day. Given the bearish readings in all of the in indicators I mentioned before I think we could see a multi-week decline.

The next three days are the weakest on a seasonal basis for the month of January and again, with short-term extremes in all of the ETFs I follow I expect to see a decline over the next 1-3 days. We shall see soon enough.

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 daily info there as well. Just click on LIKE

Short-Term High-Probability, Mean-Reversion Indicator – as of close 1/18/10

Benchmark ETFs

* S&P 500 (SPY) – 85.5 (very overbought)
* Dow Jones (DIA) –81.6 (very overbought)
* Russell 2000 (IWM) – 77.0 (overbought) / RSI (2) – 96.0
* NASDAQ 100 (QQQQ) – 94.7 (very overbought) / RSI (2) – 99.8

Sector ETFs

*Biotech (IBB) – 88.5 (very overbought) / RSI (2) – 99.1
* Consumer Discretionary (XLY) – 73.8 (overbought)
* Health Care (XLV) – 71.6 (overbought)
* Financial (XLF) – 67.7 (neutral)
* Energy (XLE) – 83.8 (very overbought)
* Gold Miners (GDX) – 34.5 (neutral)
* Industrial (XLI) – 95.8 (overbought) / RSI (2) – 99.9
* Materials (XLB) – 69.7 (neutral)
*Real Estate (IYR) – 82.0 (very overbought) / RSI (2) – 98.6
* Retail (RTH) – 74.5 (overbought) / RSI (2) – 97.9
* Semiconductor (SMH) – 96.1 (very overbought) / RSI (2) – 99.8
* United States Oil Fund (USO) – 54.0 (neutral)
* Utilities (XLU) – 75.8 (overbought)

International ETFs

* Brazil (EWZ) – 69.8 (neutral)
* China 25 (FXI) – 73.1 (overbought)
* EAFE (EFA) – 73.5 (overbought)
* South Korea (EWY) – 75.4 (overbought)

Commodity ETFs

* Gold (GLD) – 39.3 (neutral)

Ultra Extremes

* Small Cap Bear 3x (TZA) – 21.2 (oversold)
* Small-Cap Bull 3x (TNA) – 77.8 (overbought)
*UltraLong QQQQ (QLD) – 95.8 (very overbought) / RSI (2) – 99.8
* Ultra Long S&P 500 (SSO) – 87.8 (very overbought)
* Ultra Short S&P 500 (SDS) – 15.0 (very oversold)
* UltraShort 20+ Treasury (TBT) – 63.2 (neutral)

Watch and learn firsthand how I implement my options strategies.

Kindest,

Andy

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

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

January 13, 2011

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 follow are reading extremes so I had no choice but to take a position.

Intel comes out after the bell tomorrow and should be quite the catalyst for the QQQQ’s next move. I would love to say that the next move is definitely going to be bearish over the short-term, but as we all know in trading, even when MR. Probability is leaning heavily towards your side, there are no guarantees.

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 daily info there as well. Just click on LIKE

Short-Term High-Probability, Mean-Reversion Indicator – as of close 1/11/10

Benchmark ETFs

* S&P 500 (SPY) – 83.7 (very overbought)
* Dow Jones (DIA) –75.3 (overbought)
* Russell 2000 (IWM) – 69.3 (neutral)
* NASDAQ 100 (QQQQ) – 90.2 (very overbought) / RSI (2) – 98.5

Sector ETFs

*Biotech (IBB) – 76.8 (overbought)
* Consumer Discretionary (XLY) – 57.0 (neutral)
* Health Care (XLV) – 83.1 (very overbought)
* Financial (XLF) – 74.1 (overbought)
* Energy (XLE) – 79.8 (overbought)
* Gold Miners (GDX) – 42.3 (neutral)
* Industrial (XLI) – 90.9 (overbought) / RSI (2) – 98.7
* Materials (XLB) – 81.9 (very overbought)
*Real Estate (IYR) – 54.5 (neutral)
* Retail (RTH) – 48.9 (neutral)
* Semiconductor (SMH) – 88.6 (very overbought)
* United States Oil Fund (USO) – 65.2 (neutral)
* Utilities (XLU) – 64.6 (neutral)

International ETFs

* Brazil (EWZ) – 69.8 (neutral)
* China 25 (FXI) – 73.1 (overbought)
* EAFE (EFA) – 73.5 (overbought)
* South Korea (EWY) – 75.4 (overbought)

Commodity ETFs

* Gold (GLD) – 56.5 (neutral)

Ultra Extremes

* Small Cap Bear 3x (TZA) – 29.1 (oversold)
* Small-Cap Bull 3x (TNA) – 69.4 (neutral)
*UltraLong QQQQ (QLD) – 91.5 (very overbought) / RSI (2) – 98.8
* Ultra Long S&P 500 (SSO) – 84.3 (very overbought)
* Ultra Short S&P 500 (SDS) – 15.5 (very oversold)
* UltraShort 20+ Treasury (TBT) – 62.8 (neutral)

Watch and learn firsthand how I implement my options strategies.

Kindest,

Andy

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

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

January 11, 2011

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 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%.

As most of you know I have been stating this for several weeks now and as a result, I could potentially take a position in the Q’s early tomorrow if the price action is right at the open. The middle of January is historically weak, particularly for the tech-heavy Nasdaq 100 (QQQQ). So far my indicators have not led me astray and I have a feeling they will not this time around. Of course, as we all know, Mr. Probability can tease us on occasion, but as traders all we have is probabilities and with everything lining up for a short-term reprieve I think I like my chances at the moment. Subscribers, stay tuned for a possible alert tomorrow.

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 daily info there as well. Just click on LIKE

Short-Term High-Probability, Mean-Reversion Indicator – as of close 1/11/10

Benchmark ETFs

* S&P 500 (SPY) – 70.2 (overbought)
* Dow Jones (DIA) –58.9 (neutral)
* Russell 2000 (IWM) – 59.3 (neutral)
* NASDAQ 100 (QQQQ) – 85.1 (very overbought)

Sector ETFs

*Biotech (IBB) – 70.5 (overbought)
* Consumer Discretionary (XLY) – 48.8 (neutral)
* Health Care (XLV) – 76.0 (overbought)
* Financial (XLF) – 56.7 (neutral)
* Energy (XLE) – 71.0 (overbought)
* Gold Miners (GDX) – 44.5 (neutral)
* Industrial (XLI) – 84.2 (overbought) / RSI (2) – 95.3
* Materials (XLB) – 70.8 (overbought)
*Real Estate (IYR) – 42.5 (neutral)
* Retail (RTH) – 38.4 (neutral)
* Semiconductor (SMH) – 81.4 (very overbought)
* United States Oil Fund (USO) – 63.3 (neutral)
* Utilities (XLU) – 50.4 (neutral)

International ETFs

* Brazil (EWZ) – 55.6 (neutral)
* China 25 (FXI) – 57.1 (neutral)
* EAFE (EFA) – 45.9 (neutral)
* South Korea (EWY) – 60.6 (neutral)

Commodity ETFs

* Gold (GLD) – 49.0 (neutral)

Ultra Extremes

* Small Cap Bear 3x (TZA) – 38.7 (neutral)
* Small-Cap Bull 3x (TNA) – 59.8 (neutral)
*UltraLong QQQQ (QLD) – 86.1 (very overbought) / RSI (2) – 95.0
* Ultra Long S&P 500 (SSO) – 70.3 (overbought)
* Ultra Short S&P 500 (SDS) – 28.1 (oversold)
* UltraShort 20+ Treasury (TBT) – 53.5 (neutral)

Watch and learn firsthand how I implement my options strategies.

Kindest,

Andy

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

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

January 5, 2011

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 to take advantage of the short-term reprieve in XLB yesterday by locking in a decent gain (+13.8%) and I might have a similar opportunity tomorrow. Of course, it depends on how the market opens tomorrow, but there are quite a few ETFs that Mr. Probability is smiling upon right now. Subscribers, as always, be on the lookout for a possible alert tomorrow.

Anyway, back to Jason’s wonderful analysis. Today he pointed out that, again, we are moving into the weakest part of January on a seasonal basis. The S&P (SPY) has only seen the black twice out of the seven years during the three days prior to the January payroll report. To make matters worse, since 1998 the S&P (SPY) closed higher only 3 out of 13 times the two weeks following the report with a median return of 3.1%. Not good, to say the least.

Yesterday he presented the following info:

The S&P 500 SPDR (SPY) started a new year with a gain of +1% or more 6 times since its inception in the mid-1990s. Over the next three weeks, its returns were -1.4%, -2.0%, -2.6%, -0.1%, -10.6% and -3.1% (the years were 1996, 2002, 2003, 2006, 2009 and 2010).

Couple the aforementioned with what he stated last week and I think the next few weeks could be formidable for the bulls. Again, 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%.

I know, I have been writing about this for a week or so now, but everything seems a bit frothy over the short-term. I just hope we get a higher open tomorrow. If so, well, subscribers 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 daily info there as well. Just click on LIKE

Short-Term High-Probability, Mean-Reversion Indicator – as of close 1/05/10

Benchmark ETFs

* S&P 500 (SPY) – 88.6 (very overbought) / RSI (2) – 95.3
* Dow Jones (DIA) –86.7 (very overbought) / RSI (2) – 97.6
* Russell 2000 (IWM) – 59.8 (neutral)
* NASDAQ 100 (QQQQ) – 81.1 (overbought)

Sector ETFs

*Biotech (IBB) – 64.8 (neutral)
* Consumer Discretionary (XLY) – 67.7 (neutral)
* Health Care (XLV) – 81.1 (overbought) / RSI (2) – 95.7
* Financial (XLF) – 86.4 (very overbought)
* Energy (XLE) – 67.3 (neutral)
* Gold Miners (GDX) – 21.9 (oversold)
* Industrial (XLI) – 80.7 (overbought)
* Materials (XLB) – 66.7 (neutral)
*Real Estate (IYR) – 55.8 (neutral)
* Retail (RTH) – 50.6 (neutral)
* Semiconductor (SMH) – 55.6 (neutral)
* United States Oil Fund (USO) – 49.6 (neutral)
* Utilities (XLU) – 51.9 (neutral)

International ETFs

* Brazil (EWZ) – 62.2 (neutral)
* China 25 (FXI) – 79.7 (overbought) / RSI (2) -97.2
* EAFE (EFA) – 55.2 (neutral)
* South Korea (EWY) – 92.5 (very overbought) / RSI (2) – 99.3

Commodity ETFs

* Gold (GLD) – 32.0 (neutral)

Ultra Extremes

* Small Cap Bear 3x (TZA) – 37.6 (neutral)
* Small-Cap Bull 3x (TNA) – 60.1 (neutral)
*UltraLong QQQQ (QLD) – 81.8 (overbought)
* Ultra Long S&P 500 (SSO) – 90.3 (very overbought)
* Ultra Short S&P 500 (SDS) – 11.1 (very oversold)
* UltraShort 20+ Treasury (TBT) – 67.1 (neutral)

Watch and learn firsthand how I implement my options strategies.

Kindest,

Andy

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

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

January 4, 2011

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 Korea ETF, EWY, has pushed into a short-term “very overbought” state with a RSI (2) reading above 99. Typically, when this type of reading occurs a short-term reprieve (1-3 days) occurs. It is not typical to see back to back trades in the High-Probability, Mean-Reversion strategy, but it could come to fruition if EWY opens flat to higher tomorrow. Subscribers, be on the lookout for an alert if the aforementioned occurs at the open.

Today, Jason Goepfert of the highly-acclaimed SentimenTrader, stated the following:

The S&P 500 SPDR (SPY) started a new year with a gain of +1% or more 6 times since its inception in the mid-1990s. Over the next three weeks, its returns were -1.4%, -2.0%, -2.6%, -0.1%, -10.6% and -3.1% (the years were 1996, 2002, 2003, 2006, 2009 and 2010).

Couple this with what I have stated about the tech-heavy Nasdaq 100 (QQQQ) over the past week or so and I think we could see a nice decline over the next few weeks. Of course, there are no guarantees, this is the market we are talking about where as we all know anything and everything can happen, but it sure does look frothy here and the bears seem to be lurking in the shadows.

I also want to take the time to thank all of you, my loyal readers for an amazing 2010. The crowd here has increased tremendously and my subscribers numbers are nearing capacity. The Slope of Hope crowd continues to offer wonderful support and the newly formed community over at Seeking Alpha has been more than amazing. Of course, there is still a few spots available so if you wish to join or just check out the newsletter remember, I am offering a 30-day free trial.

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 1/04/10

Benchmark ETFs

* S&P 500 (SPY) – 83.3 (very overbought)
* Dow Jones (DIA) –82.4 (very overbought)
* Russell 2000 (IWM) – 45.9 (neutral)
* NASDAQ 100 (QQQQ) – 71.6 (overbought)

Sector ETFs

*Biotech (IBB) – 49.6 (neutral)
* Consumer Discretionary (XLY) – 53.9 (neutral)
* Health Care (XLV) – 77.9 (overbought)
* Financial (XLF) – 80.2 (very overbought)
* Energy (XLE) – 61.5 (neutral)
* Gold Miners (GDX) – 27.4 (oversold)
* Industrial (XLI) – 72.2 (overbought)
* Materials (XLB) – 62.1 (neutral)
*Real Estate (IYR) – 50.7 (neutral)
* Retail (RTH) – 51.8 (neutral)
* Semiconductor (SMH) – 63.7 (neutral)
* United States Oil Fund (USO) – 37.9 (neutral)
* Utilities (XLU) – 77.5 (overbought)

International ETFs

* Brazil (EWZ) – 83.9 (very overbought)
* China 25 (FXI) – 79.2 (overbought)
* EAFE (EFA) – 67.5 (neutral)
* South Korea (EWY) – 92.4 (very overbought) / RSI (2) – 99.3

Commodity ETFs

* Gold (GLD) – 34.2 (neutral)

Ultra Extremes

* Small Cap Bear 3x (TZA) – 50.6 (neutral)
* Small-Cap Bull 3x (TNA) – 46.4 (neutral)
*UltraLong QQQQ (QLD) – 72.2 (overbought)
* Ultra Long S&P 500 (SSO) – 85.5 (very overbought)
* Ultra Short S&P 500 (SDS) – 15.8 (very oversold)
* UltraShort 20+ Treasury (TBT) – 42.4 (neutral)

Watch and learn firsthand how I implement my options strategies.

Kindest,

Andy

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