A Wonderful Expiration Month and Still Overbought

August 21, 2006 · Print This Article

First, I want to say thank you to everyone for your kind words regarding the birth of our baby girl, Macey. Your good wishes were greatly appreciated.

After every options expiration I try to report on the performance of our two strategies that we comment on occasionally in the blog. This expiration period was certainly kind to our ETF Extremes strategy. As I have mentioned repeatedly over the past few months, patience coupled with disciplined trading guidlines are what make investment (trading) strategies effective and this is especially the case in our ETF Extremes strategy. The strategy went without a signal for several months and many of our subscribers were worried about the lack of trading in the strategy. My response was patience, patience, patience. We are in this for the long-term.

Well, several weeks ago our proprietary signals were triggered in the ETF Extremes strategy and it just happened to come at the recent lows. Great timing indeed! The trade lasted for roughly a week and we made ended up with a 13.3% profit after all was said and done. The trade brought our ETF Extremes sample portfolio strategy up to 23.9% YTD with a winning ratio of 100% (not a typo), not a bad gain after 7 months and 6 trades. Hopefully, we can keep up our winning ways going forward. Check it out at http://www.crowderinvestments.com/performance.shtml.

As for our Gap Fade strategy we finished lower with a (-1.2%) for the month leading to (-3.2%) loss YTD. After a few needed revisions to the strategy we hope to get back to our highs of 35% back in April. Overall, it was a wonderful expiration period for the strategies as we had a net gain of 12.1% for both strategies.

As for the recent performance of the market we still remain in an “overbought” position in SPY and DIA with the QQQQ’s bordering an “overbought” state. The volume today was extremely low marking one of the slowest trading days of the year. Given the recent rally and overbought conditions in the S&P and Dow I would not be surprised to see a nice move lower possibly closing the gap from last Wednesday. Keep an eye on how the market reacts over the coming days, especially later in the week and early next week as the market moves into a seasonally bearish period.

Andrew Crowder, Chief Options Strategist, www.crowderinvestments.com

RSI Wilder (5) for August 21, 2006