August 17, 2017

Consumer Discretionary and Nasdaq 100 Hit Short-Term Overbought Extreme

The market marched higher again today and pushed quite a few of the ETFs I follow in an overbought state.

However, only Consumer Discretionary (XLY) and the Nasdaq 100 (QQQQ) ETFs  hit a short-term overbought extreme, but neither have RSI (2) readings above 95 so I am only watching from the sidelines for now. If they can push to extreme levels (95+) then there could be a potential for a trade. Until then I will patiently wait on the sidelines.

I still have a position in my High-Probability, Men-Reversion strategy and I am quite comfortable with it at the moment as most of the ETFs that I follow have pushed into an overbought state. This often signals that a short-term (1-3 days) reprieve is right around the corner.

Furthermore, historical seasonal tendencies seem to be lining up as the next three days are quite bearish for the market and as most of my loyal readers already know, the third day consists of the trading day following options expiration which is historically very bearish.

Did I mention that we still have a few unclosed gaps below?

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Short-Term High-Probability, Mean-Reversion Indicator – as of close 2/16/11

Benchmark ETFs

* S&P 500 (SPY) – 78.5 (overbought)
* Dow Jones (DIA) 78.2 (overbought )
*Russell 2000 (IWM) – 75.9 (overbought)
* NASDAQ 100 (QQQQ) – 84.3 (very overbought)

Sector ETFs

*Biotech (IBB) – 72.9 (neutral)
* Consumer Discretionary (XLY) – 84.1 (very overbought)
* Health Care (XLV) – 73.9 (overbought)
* Financial (XLF) – 78.8 (overbought)
* Energy (XLE) – 71.4 (overbought)
* Gold Miners (GDX) – 72.3 (overbought)
* Industrial (XLI) – 77.1 (overbought)
* Materials (XLB) – 68.3 (neutral)
*Real Estate (IYR) – 72.3 (overbought)
* Retail (RTH) – 62.1 (neutral)
* Semiconductor (SMH) – 75.5 (overbought)
* United States Oil Fund (USO) – 22.6 (oversold)
* Utilities (XLU) –39.1 (neutral)

International ETFs

* Brazil (EWZ) – 67.8 (neutral)
* China 25 (FXI) – 57.8 (neutral)
* EAFE (EFA) – 71.6 (overbought)
* South Korea (EWY) – 23.2 (oversold)

Commodity ETFs

* Gold (GLD) – 74.3 (overbought)

Ultra Extremes

* Small Cap Bear 3x (TZA) – 22.8 (oversold)
* Small-Cap Bull 3x (TNA) – 76.0 (neutral)
*UltraLong QQQQ (QLD) – 84.1 (very overbought)
* Ultra Long S&P 500 (SSO) – 78.5 (overbought)
* Ultra Short S&P 500 (SDS) – 20.4 (oversold)
* UltraShort 20+ Treasury (TBT) – 46.9 (neutral)

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Kindest,

Andy