August 22, 2017

Cash is a position and the ETF Extremes Strategy proves just how valauble a position it is

The holiday shortened week began much like last week left moff. By now everyone knows what happened today in the market (emergency rate cut)so I will not bother you with the details.

It was interesting to the see the VIX reach the August highs around 37.5 before moving lower. The 37.5 reading in August marked an intermediate-term low in the S&P, so it will be interesting to see if the same occurs this time around.

The market is extremely oversold right now so I would expect to see a bounce over the next few sessions, but as we have seen lately and what is indicative of a bear market, oversold rallies don’t come as quickly.

We did make our first RUT Iron Condor trade today for a credit of $.75. I will post the details tomorrow. We placed the trade for the SPX Iron Condor as well.  Again, I will post the results in tomorrow’s post. RUT could end up being a better underlying for our Iron Condor strategy, but I would like to follow it for a few months in the newsletter before making it official.

I could go on for hours about today’s market and the potential future, but I will save that for the next issue of my newsletter.One thing I can say is that our ETF Extremes strategy has been in cash now since late July. Yes, late July. Since that time I have witnessed 2/3’s of my subscribers leave due to a lack of signals and move into strategies that are constantly exposed to the market. Well, where has that left them? While the ETF Extremes strategy has made over 100% since its inception roughly two years ago the benchmark S&P is only up about 4.5%. Moreover, since our last signal on 7/26 the S&P has lost -12.1%. I think this and the fact that we have lost so many fly by night subscribers shows how committed we are to this strategy. It also proves that we are running a strategy not a business. Hopefully, our performance speaks for itself, especially over the long haul. Yes, I have been just as frustrated by the lack of signals, but I have also stuck by the strategy’s guidelines not forcing a trade which has certainly paid off during the recent decline. We are nearing a signal once again (has happened several times since our last official trade) so hopefully we will see a profitable trade in the near future. I think 113.4% with only 15 trades over two years speaks for itself. As I always say the less you trade the more profitable you will be. Most in the options world can’t understand this concept. They see wonderful gains for 6 months, even a year and then it all comes crashing down.  Being exposed to the market at all times, especially in options, means being exposed to the good times and the bad. Cash is a position that is often overlooked.

Overbought/Oversold for January 22, 2008 

S&P (SPY) – 10.4 (very oversold)

Russell 2000 (IWM) – 14.3  (very oversold)

Dow (DIA) – 11.9 (very oversold)

Nasdaq 100 (QQQQ) – 13.9 (very oversold) 

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