August 17, 2017

Could we see another gap lower tomorrow? What would it mean for the options trading strategies?

Another decline and more oversold readings. We also (depending on the reaction tomorrow morning to the economic reports) could have a signal in the QQQQ Gap Fade strategy. A sharp gap lower tomorrow would certainly put the tech-heavy index back in a short-term oversold state and if you couple this with the aforementioned gap there could be a nice set-up in the making. Subscribers, as always, I will send out a trade-alert, if and when a trade occurs. So far since the strategy is up 24.2% with a win ratio of 75% (6 out of 8 trades) since it was initiated in early Feb ’08.

There are a few sectors back on my radar after today’s plunge. Materials (XLB) and Utilities (XLU) are the two that I am watching closely especially if we see the overall market move lower tomorrow and into an oversold state.

I would also like to point out that on a seasonal basis the last three days of June have a bullish bias as roughly 70% of those days over the past thirty years have shown an advance.

Could we see more trades in the three strategies this week? Only time will tell, but a move lower tomorrow would certainly increase the odds greatly.

Overbought/Oversold levels for July 28, 2008

ETF Extremes Options Strategy

* S&P 500 (SPY) – 31.7 (neutral)
* Dow Jones (DIA) – 30.2 (neutral)
* Russell 2000 (IWM) – 46.3 (neutral)
* NASDAQ 100 (QQQQ) – 39.9 (neutral)

Sector ETF Extremes Options Strategy

* Biotech (IBB) – 87.5 (very overbought)
* Consumer Discretionary (XLY) – 37.1 (neutral)
* Health Care (XLV) – 56.2(neutral)
* Financial (XLF) – 38.1 (neutral)
* Energy (XLE) – 30.6 (neutral)
* Industrial (XLI) – 38.8 (neutral)
* Materials (XLB) – 28.8 (oversold)
* Real Estate (IYR) – 42.1 (neutral)
* Retail (RTH) – 32.3 (neutral)
* Utilities (XLU) – 21.9 (oversold)

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