10 Year Fibonacci Retracement Levels on the NASDAQ 100 (QQQQ)

September 25, 2008

I am going to do things a bit different over the next few days. I want to show the Fibonacci Retracement levels for the benchmark ETFs I follow in the ETF Extremes options strategy. We can reference these levels as we go along and when certain important levels are hit, especially when they coincide with an overbought or oversold levels. I will also be presenting more Fib charts going forward with different time frames, but I will keep it confined to the ETFs I follow for the strategies so please do not ask for additional fib charts.

By the way have you checked the performance of the ETF Extremes strategy lately. It is up 147% since its inception over 30 months ago. Bear market, bull market, neutral, the ETF Extremes doesn’t care.

10 Year look at the NASDAQ 100 (QQQQ)

Click the thumbnail for the full image

As you can see the price of QQQQ sits right below the 38.2% retracement level which should act as a strong area of overhead resistance. The index is in a neutral state so we are not seeing any extremes at the moment, however; I expect to see the ETF struggle with the 38.2% retracement level going forward.

Random Market Comments

I still think we are headed lower going forward. Just take a look at my post from a few days ago on the 1932 Short Selling Ban. Several other stock markets have imposed such bans with similar results.

Most recent, the Karachi Stock Market (Pakistan) imposed a short selling ban only to see the stock market plummet after an initial 9% surge after the government intervention was announced and upwards of 15% a few days later. However, their market quickly rolled over and eventually lost 30%.

I am not stating that the U.S. market will suffer nearly as much, but I also do not think we are headed higher any time soon. I do not think the bailout will serve as a positive over the short or intermediate-term, especially when the short-selling ban is lifted in early October.

Moreover, have you seen the economic reports lately? They continue to be absolutely horrid, yet the focus remains on the bailout. Well, once the bailout is over and the market begins to focus on the economic indicators I think we are due for another sell off.

As you all know I usually try not to bother with the news at hand, but I just can’t resist at the moment.

Back to the Technical Mumbo Jumbo

Anyway, back to the current technical state of the market. Nothing new here. What a surprise, eh? I expect to see another test of the lows over the next few weeks. Hopefully, over the short-term we can watch a few extremes enter the market. I have been patiently waiting on the sidelines for the smoke to clear which is often hard to do as a trader. As always, I will wait for a high-probability situation to present itself and then act accordingly.

Have a great night! (I will try to post a few interesting reads later tonight if I have some free time)

My good friend Tim Knight, founder of Prophet.net, has two things for you to remember in this crazy market.

Andy

Overbought-Oversold levels for September 25, 2008

ETF Extremes Options Trading Strategy

* S&P 500 (SPY) – 50.3 (neutral)
* Dow Jones (DIA) – 50.2 (neutral)
* Russell 2000 (IWM) – 44.6 (neutral)
* NASDAQ 100 (QQQQ) – 47.9 (neutral)

Sector ETF Extremes Options Strategy

* Biotech (IBB) – 53.2 (neutral)
* Consumer Discretionary (XLY) – 41.6 (neutral)
* Health Care (XLV) – 48.3 (neutral)
* Financial (XLF) – 53.4 (neutral)
* Energy (XLE) – 58.5 (neutral)
* Industrial (XLI) – 38.0 (neutral)
* Materials (XLB) – 37.8 (neutral)
* Real Estate (IYR) – 48.1 (neutral)
* Retail (RTH) – 39.6 (neutral)
* Utilities (XLU) – 52.6 (neutral)

If you would like to follow my strategies with real-time alerts or have them auto-traded by a participating broker please click the following link! Try my options trading strategies. Remember, this is a marathon and not a sprint.

Filed Under 10 Year QQQQ Fib Chart, Crowder's Daily Market Commentary, Iron Condor ·

Mr. Probability

October 11, 2007

Once again Mr. Probability was on our side. As expected the market took a bit of a breather today. The market gapped up today and then traded in a tight, sideways manner before investors locked in gains at record highs and consequently pushed the market lower.

The gap up on 10/4 came close to filling today, but the S&P (SPY) managed to hold off the late day decline and bounce higher into the close.

I am still on the sidelines (at least in my short-term trading) looking for a good risk/reward trade. As I have reported numerous times that while shorting “overbought”, preferably “very overbought” measures are often difficult to gage because markets can remain in an overbought state for days and sometimes weeks.

I did a study, available on the Insider’s page of the website and in the White Paper, regarding fading extremes in the market and the rate of success with overbought versus oversold measures.

Oversold measures had a much higher rate of success. We have not seen an oversold reading in the S&P (SPY) since 8/15 which was the last time we tried to establish a trade in the ETF Extremes strategy. Unfortunately, we were unable to get a fill at that time which sometimes happens in the fast-moving world of options trading. But as I always say opportunities are made up easier than losses. Believe me, I would love to see a move into oversold territory.

As for our other strategies, the SPY Diagonal LEAPS strategy continues to make strides. I am not sure when the last time we witnessed a loss on a daily basis. It is often not advised to fret over this strategy on a day-to-day basis. Only when we see sharp moves like today do we want to make sure we are paying close attention to our positions and how they are reacting to the price action. Theta continues to work in our favor. Even with the underlying SPY losing $.75, the strategy gained $31.50 for a total of $1,066.50 or 5.3%. So far we have accomplished our goal of making 3% to 5% a month.

Theta has officially kicked in. The strategy had an overall theta reading (adding together theta of all positions in the strategy) of $16 yesterday and at today’s close the overall theta was $32.54.

As I have reported over the last few days, we will need to roll our October short positions into November over the next few days. This is probably the most important guideline to the strategy so stay tuned. I will give you all the details.

Our Iron Condor position looks very good for the October expiration cycle. With a range of 200 points we are safely within our range. The underlying SPX would have to move 4.9% to the upside and 8.0% to the downside before we are in jeopardy of taking a loss.

We still have alot of ground to make up since our two losses but we are in it for the long haul so, as always patience is key. We have altered our guidelines to minimize losses and we think our approach of choosing large ranges, allowing us to make around 7-10% during an expiration cycle (4 to 5 weeks) as long as the VIX remains above 15 should prove to be successful. Of course, only time will tell. When we took our first bg loss back in April we had a range of 100 points. Now our chosen range is double that. The downside is that we are bringing in less premium, but we will take that anyday knowing that the probability of success is in our favor.

Overbought/Oversold for October 11, 2007

S&P (SPY) - 58.4 (neutral)

Russell 2000 (IWM) - 52.8 (neutral)

Dow (DIA) - 51.7 (neutral)

Nasdaq 100 (QQQQ) - 53.7 (neutral)

Subscribers please check the Insiders’ page of the website if you wish to check the overbought/oversold levels of the following 22 ETF’s: OIH, XLF, XLE, XLY, XLK, XLV, XLB, XLI, XLP, TTH, XLU, GLD, FXI, ILF, EZU, EWA, INP, UNG, DBA, DBB, DBE, and DBP on a daily basis. (not published the week of Oct. 8-12)

We work hard to bring you our latest views, opinions and research on a daily basis. If you are a loyal reader and find our thoughts useful please show us your support by joining our newsletter service. We currently follow 3 stock options strategies in our investment newsletter, the ETF Extremes, SPX Short Iron Condor and SPY Diagonal LEAP.

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

Filed Under Iron Condor, SPY LEAPS Strategy ·

Divergence in the major benchmarks

October 8, 2007

The broad market index (S&P) gapped lower today today and never looked back. The push lower moved the major indices we follow back in a neutral state. Interestingly enough, the tech heavy Nasdaq 100 (QQQQ) surged higher creating a short-term divergence that will most likely settle out over the coming days.

The move lower was to be expected given the reasons I stated in the blog Friday. Tomorrow and Wednesday bring bearish seasonal days and then the market ends the week with two historically bullish days. This is one of the few weeks of the year, according to the Stock Trader’s Almanac, that the market experiences four days with historically significant bullish/bearish seasonal tendencies. As I always say, I never use seasonal tendencies to base a trade, but I always consider which way the seasonal winds are blowing, particularly if they wholeheartedly agree with my current short-term direction. This often increses the probability of my trade.

Stock Options Strategy – SPY Diagonal LEAPS

I discussed the strategy in great detail in the newsletter that I sent out Sunday. Subscribers, please take a look at this if you have not had a chance. It is archived on the Insider’s page of the website.

With the underlying SPY down $.83 today the portfolio still made gains. As it stands as long as SPY stays above $150.50 the strategy should experience a wonderful month. Since its inception three weeks ago, the conservative options strategy (by most option strategies standards), is up $902 in our test account. Based on the $20,000 that we started with (even though $2,500 is sitting in cash) the strategy is up 4.5%. Over the same period SPY is only up 1.7%. Our goal is to beat the market on an annual basis and this is certainly a great beginning.

Stock Options Strategy – SPX Short Iron Condor

The S&P (SPX) remains safely within our 200 point range. Hopefully the VIX will stay above 15, preferably 20, so that we can continue to choose huge ranges while still making 7%-10% from expiration to expiration. OF course, we realize that high-probability trades come with risk if the underlying moves sharply in one direction, but since our last loss we have added a few guidelines to hopefully minimize the losses when they occur.

I have heard from many traders/brokers out there that Iron Condors are currently out of favor. The huge swings back in late July/early August created some drawdowns among many iron condor strategists, ourselves included. But, with proper money management (only allocating a small percentage to any one option strategy) those who felt the short-term pain lived to trade another day. We remain patient with the strategy, knowing it will take its lumps now and then. One thing before I sign off, always know the risk/reward of every strategy that you consider trading. After that trade it on paper for a few months, learn the ins and outs. Knowing what the max loss is going to be and feeling comfortable with it will make you a better trader. Why? Because it will force you to pay attention to risk management and more specifically, how position sizing will effect your overall portfolio.

Overbought/Oversold for October 8, 2007

S&P (SPY) - 66.1 (neutral)

Russell 2000 (IWM) - 68.5 (neutral)

Dow (DIA) - 64.7 (neutral)

Nasdaq 100 (QQQQ) - 86.7 (very overbought)

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

Filed Under Iron Condor, SPY LEAPS Strategy ·

Overbought/Oversold and Strategy Discussion

September 29, 2007

Daily Commentary

Two weeks ago I began following the overbought/oversold levels of 21 new ETFs. As reported at months end I would move all them besides the major market indices (SPY, QQQQ, IWM, and DIA) into the insider’s page page for paid subscribers only. Paid subscribers will now have daily access to these numbers, so check the insider’s page daily for the overbought/oversold numbers.

We will also post how we use these numbers in our trading and this will be archived in the Insider’s page for easy reference.

SPX Iron Condor Strategy

The SPX Iron Condor strategy made 9.3% during the September expiration period and if all goes well we should make around 7.5% during the October expiration period.

The recent market volatility has led to a few losing trades, but with a few adjustments (wider range, mandatory rolling guidelines) we are certain that the strategy will once again be back in the positive. If anything, now is a great time to learn the strategy. Market volatility has declined a bit and the VIX remains above 15. As long as the VIX stays above 15 we should have the opportunity to have an extremely wide range (roughly 200 or more points) which allows for a 6.5% swing up/down over a four week period. As long as the indice finishes/settles the four week period within our wide range we should make anywhere from 5% to 10% a month. The win ratio in the strategy so far is 70% and if all goes well we should be able to increase that percentage to 75% by years end. The downfall so far this year have been the drawdowns. We have worked diligently to hopefully alleviate the magnitude of the drawdowns. Losses are inevitable, but appropriate risk management techniques should help to ease the drawdowns. Of course in trading nothing is guaranteed, but a move to widen our range to accomodate largeer swings coupled with new rolling guidelines should ceratinly help going forward. Only time will tell. Stay tuned.

ETF Extremes Strategy

I know to many of you I am beginning to sound like a broken record, but this strategy is all about patience. With only two losses in almost a two year period (win ratio – 86%) how can you not be patient. As I stated ealier this week and in the expiration report I expect to see signals pick up as we move into the fourth quarter, the busiest time of the year. Last year the strategy made over 30% during the last three months and we are hoping to do the same again this year. Again, nothing is guaranteed in trading, so all we can do is go with the probabilities and in the ETF Extremes stratetgy probabilities are always on our side. We patiently wait for a high-probability set-up and pounce. Yes, this leads to less frequent trading, but you must remember each strategy is like a stock, they can and should be diversified to take advantage of different market scenarios.

New SPY Diagonal LEAPS Strategy

We initiated our positions in the strategy on Monday, the beginning of the October expiration period. Our hope is that after we educate you on how this strategy works we can make the strategy live in a month or so. We wanted to try something new on the blog. Introducing a new strategy for the public to learn and follow made sense. Hopefully, we can educate you on the advantages/disadvantages of the strategy over the next month or so.

The following trades were placed on our test account on Monday September 24th..

Sell to open 2 SPY Oct07 152 calls

Buy to open 2 SPY Dec09 125 calls for $35.70 or $7,140.00

Sell to open 1 SPY Oct07 154 calls

Buy to open 1 SPY Dec09 125 calls for $36.88 or $3,688.00

Sell to open 1 SPY Oct07 151 calls

Buy to open 1 SPY Dec09 130 calls for $31.55 or $3,155.00

Buy to open 1 SPY Dec09 130 calls for $35.35 or $3,535.00

For a total capital outlay of $17,518.00 + $26.55 (commissions) = $17,544.55

Not much to talk about this week. SPY ended the week a few cents higher so the strategies value reamined flat. Typically during the first week of an expiration period, time decay (theta) does not factor in the equation. If SPY continues to remain fairly flat, you will begin to see how time decay (theta) starts to benefit the strategy. Next week, theta should take hold and as we move closer towards October expiration you will see the phenomenon of time decay play out. This is what you want to concentrate on the next four weeks, learning how time decay works and reacts in this strategy. It is the dominate factor and what makes the strategy tick. I will be back with a lengthier discussion next week once we start to see the Greeks, particularly delta, gamma and theta unfold.

Overbought/Oversold for September 28, 2007

S&P (SPY) - 63.3 (neutral)

Russell 2000 (IWM) - 48.2 (neutral)

Dow (DIA) - 76.3 (overbought)

Nasdaq 100 (QQQQ) - 78.3 (very overbought)

Oil Services (OIH) - 53.7 (neutral)

Newly added ETF’s – Will only be available to paid subscribers starting 10/1. Subscribers please check the Insider’s page if you wish to check the numbers on a daily basis.

Core Sector List

Financials (XLF) - 52.8 (neutral)

Energy (XLE) - 54.3 (neutral)

Cons. Cyclicals (XLY) - 50.7 (neutral)

Technology (XLK) - 70.5 (overbought)

Health Care (XLV) - 52.6 (neutral)

Materials (XLB) - 68.7 (neutral)

Industrials (XLI) - 75.1 (overbought)

Cons. Staples (XLP) - 79.9 (overbought)

Telecom (TTH) - 78.9 (overbought)

Utilities (XLU) - 59.7 (neutral)

Gold (GLD) - 82.2 (very overbought)

International

FTSE/XINHUA China 25 (FXI) - 81.9 (very overbought)

Latin America (ILF) - 89.5 (very overbought)

MSCI EMU (EZU) - 84.5 (overbought)

Australia (EWA) - 91.0 (very overbought)

India (INP) - 80.1 (very overbought)

Commodities

Natural Gas (UNG) - 40.4 (neutral)

Agriculture (DBA) - 71.6 (overbought)

Base Metal (DBB) - 70.6 (overbought)

Energy (DBE) - 57.5 (neutral)

Prec Metal (DBP) - 86.3 (overbought)

Okay, the plan is to follow a total of at least 25 major ETF’s is complete. Again, in the near future this list will only be available to subscribers to the newsletter/strategies on the Insiders’ page.

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

Filed Under Iron Condor, SPY LEAPS Strategy ·