July 21, 2017

Major Benchmarks Remain in an Overbought State. Potential Gap Fade Ahead?

The Dow and SPY remain in an overbought state and the Russell and Nasdaq 100 are not far behind. It seems as though the market has hit some decent resisitance at current levels so it will be interesting to see if we see a short-term reprieve over the coming days. As I stated yesterday I would like to see the S&P push into the 1400 area as this would certainly move the major benchmark into an extreme overbought state.

The Dow actually moved close to a trigger today. The intraday high for the RSI (2) was 96.4, only 1.6 away from what would have been a signal in the ETF Extremes.

One other note of interest is the International sector. The three ETFs that I follow are now all in a near extreme to extreme overbought state. Brazil continues to amaze me. It moved sharply higher through overhead resistance at the 85 price level in the face of extreme overbought conditions. This is where stops come in handy. Losing trades will happen, it is your job to minimize them as best as you can and the good old stop-loss is one of the most effective ways. Position-sizing should also always be considered. Anyway, the RSI (2) of EWZ is now 99.6, the highest in well over a year. Typically, this means a short-term reprieve is near and the probability of a short-term pause increases as EWZ moves higher and higher into overbought territory. Well, at this point there really isn’t much room to move higher, at least that is what the technicals say.

The Emerging Markets sector also pushed into an “very overbought” state today and the RSI (2) is now above 96.

Gap Fade Subscribers’ – We could see the potential for a trade tommorow morning due to the GDP report. I will keep you informed of any pre-market activity on the Insiders page tomorrow morning as well as my trade setups for the day. Stay tuned!

By the way, the feedback has been wonderful in regards to the Insders page. Subscribers seem to like the three posts daily and the tradeable information. Please let me know if you would like to see any valuable additions to the Insiders page. I am all ears. I am going to try over hte next month to have a live portofolio up in the Insiders’ page as a reference for subscribers’.

Overbought/Oversold for February 26, 2008

Major Benchmarks

  • Dow (DIA) – 77.1 (overbought)   
  • S&P (SPY) – 73.2 (overbought)
  • Russell 2000 (IWM) – 65.2 (neutral)
  • Nasdaq 100 (QQQQ) – 63.9 (neutral) 

Sectors

  • Biotech (IBB) – 53.4 (neutral)
  • Consumer Discretionary (XLY) -66.6 (neutral)
  • Health Care (XLV) – 55.9 (neutral)
  • Financial (XLF) – 64.7 (neutral)
  • Energy (XLE) – 66.8 (neutral)
  • Industrial (XLI) – 69.3 (neutral)
  • Materials (XLB) – 78.5 (overbought)
  • Real Estate (IYR) – 60.3 (neutral)
  • Retail (RTH) – 64.3 (neutral)
  • Utilities (XLU) – 40.2 (neutral)

International

  • Brazil (EWZ) – 92.2 (very overbought)
  • China (FXI) – 71.6 (overbought)
  • Emerging Markets (EEM) – 82.6 (very overbought)

Others of Interest

  • Clean Energy (PBW) – 43.2 (neutral)
  • Water (PHO) – 66.7 (neutral)

more overbought/oversold levels on additional sectors found in the Insider’s page

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