August 17, 2017

Classic Washout – Where Now?

Could today be the intermediate-term low that we have all been seeking? It certainly felt like a day of capitulation. One thing is certain, what we did get was a fake breakdown. The futures pointed towards a breach of the October lows and after a brief rally (if you can call it that) the bears took control and moved the market decisively lower. The move lower lasted until around 1pm EST (after almost all stops were taken out, convenient eh?) and then quickly rallied to close near the highs of the day and the buying demand was legitimate as we moved past several important areas of overhead resistance.

The question is now, will this rally continue? If you have been reading my blog recently you certainly know my opinion. All of the intermediate-term indicators are pointing towards a rally that lasts until the New Year. Seasonality is very strong in the 4th quarter and the “big boys” need to finish the year on a strong note and believe me they have the power to do so. I will talk about the classic washout that occurred today in much greater detail in the upcoming Weekend Report. 

I do think that once we hit a short-term overbought state that we will see a short-term (1-3 day) pullback and that is exactly what I will be looking for in the ETF Extremes and the Sector ETF Extremes. 

Until then I will be patiently waiting on the sidelines.

Have a great night!

Overbought-Oversold levels for November 13, 2008

ETF Extremes Options Trading Strategy

* S&P 500 (SPY) – 48.9 (neutral)
* Dow Jones (DIA) – 51.2 (neutral)
* Russell 2000 (IWM) – 49.4 (neutral)
* NASDAQ 100 (QQQQ) – 47.1 (neutral)

Sector ETF Extremes Options Strategy

* Biotech (IBB) – 57.9 (neutral)
* Consumer Discretionary (XLY) – 45.0 (neutral)
* Health Care (XLV) – 57.6 (neutral)
* Financial (XLF) – 42.0 (neutral)
* Energy (XLE) – 55.1 (neutral)
* Industrial (XLI) – 47.2 (neutral)
* Materials (XLB) – 48.0 (neutral)
* Real Estate (IYR) – 47.4 (neutral)
* Retail (RTH) – 51.5 (neutral)
* Utilities (XLU) – 60.5 (neutral)

Ultra Extremes (Insiders Page Only)

* Ultra Long (SSO) – 47.6 (neutral)
* Ultra Short (SDS) – 45.9 (neutral)

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