August 22, 2017

Brazil (EWZ), DOW (DIA) and the gap closure from 2/5.

Seven of the ETFs I follow have moved into an overbought to very overbought state. (Listed on the Insiders page)

Recently I mentioned XLE and IBB, in which both faded the extreme.

I have been keeping a close eye on Brazil (EWZ) over the past few days to see if the RSI (2) could push up towards the 98 level, which in most cases would signal a trigger for me to fade the extreme. Well, at the end of the day EWZ had pushed higher and the RSI (2) moved to 97.5 and it actually hit 98.0 intraday, so an open higher tomorrow and I might step in. I will keep you informed.

As for our other strategies, particularly the ETF Extremes, we are once again nearing a signal. The Dow (DIA) and S&P 500(SPY) are in an overbought state (S&P almost) but the RSI (2) is still far from the extreme levels at 89.3. I would like to see at least a push in the mid 90’s and the best case scenario would be a push through the 98 level.

The one interesting note is that the major benchmarks finally closed the large gap lower from 2/5 today so we could see some strong overhead resistance over the short-term. I will also be watching the recent highs which were established on 2/1. If the market does push into those areas I would expect to see a short-term fade as overhead resistance and extreme overbought levels (especially in a downtrending market) should prove to be too much. A move to the highs established on 2/1 would certainly push DIA and most likely SPY into very overbought territory and to a RSI (2) level between 95 and 98.

  • For the subscribers’ who are here for the Iron Condors I will have it for you later tonight/tomorrow morning before the opening bell on the Insiders page.

Overbought/Oversold for February 25, 2008

Major Benchmarks

  • Dow (DIA) – 70.0 (overbought)   
  • S&P (SPY) – 69.6 (neutral)
  • Russell 2000 (IWM) – 59.2 (neutral)
  • Nasdaq 100 (QQQQ) – 51.7 (neutral) 

more overbought/oversold levels on additional sectors found in the Insider’s page

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