Bearish Attempts Thwarted Once Again

Bearish attempts (at least in small-cap and tech-heavy indexes) were once again thwarted at the end of the day today. The seems to be a tug-of-war at the current levels in the Russell (IWM) and NASDAQ 100 (QQQQ). It was the second straight day that the prior highs were not taken out which is a positive for the bears. However, the price action has been frustrating and difficult to trade for both, the bulls and bears. I continue (due to the overbought nature of the higher-beta sectors) to have a short-term lean towards the bearish camp and if the $46.90 area is taken out (and holds below this level) I expect to see a wave selling. It still looks like a bear flag set-up at this juncture and until that is broken I wil stay with the intermediate-term trend as well.

Again, I will keep it short tonight as not much has changed with the indicators including my proprietary short-term overbought/oversold model. Hopefully we get some type of extreme in the near future. Until then I will patiently wait on the sidelines for a high-probability set up.

Overbought/Oversold levels for August 13, 2008

ETF Extremes Options Strategy

* S&P 500 (SPY) – 51.4 (neutral)
* Dow Jones (DIA) – 47.3 (neutral)
* Russell 2000 (IWM) – 71.3 (overbought)
* NASDAQ 100 (QQQQ) – 74.2 (overbought)

Sector ETF Extremes Options Strategy

* Biotech (IBB) – 58.9 (neutral)
* Consumer Discretionary (XLY) – 58.3 (neutral)
* Health Care (XLV) – 72.2 (overbought)
* Financial (XLF) – 34.0 (neutral)
* Energy (XLE) – 60.2 (neutral)
* Industrial (XLI) – 53.2 (neutral)
* Materials (XLB) – 68.1 (neutral)
* Real Estate (IYR) – 47.6 (neutral)
* Retail (RTH) – 62.2 (neutral)
* Utilities (XLU) – 42.4 (neutral)

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