August 17, 2017

March Blues for the ETF Extremes

Our current ETF Extremes position has endured a rough March. I still expect the market to get whacked over the next few weeks due to all of the bearish extremes that have been built into the market during the March rally. My expectation is to see a move that brings the QQQQ back down to the gap from 3/5.

As I stated before there are quite a few bearish technical extremes that have been reached over the past few weeks with the most recent being the Equity Put/Call ratio. It has moved to the third most extreme since the bull market began one year ago. Two out of the three occasions have led to a short-term reprieve.

Another bearish sign is the lack of small options traders to willingly buy protective puts. This is one of the best contrarian indicators and one of my favorites. Currently, small options traders have only spent 14% of their total volume buying protective puts which is an incredibly small percentage especially considering the recent, low-volume rise in the market. This almsot always spells trouble for the market going forward, particularly over the short-term. This should certainly help our current ETF Extremes position if indeed all of these bearish indicators prove true. If not, this could be the worst trade in the almost four-year history of the ETF Extremes portfolio.

I apologize for the lack of post over the past few weeks. I am currently finishing up my book and website on Iron Condors.

Stay tuned!