August 19, 2017

Market ‘Very Oversold’ – Short-Term Bounce Imminent

The market ended a disappointing January with a sharp loss as market participants questioned whether the U.S. economy could sustain its large 4th quarter growth rate. Furthermore, poor earnings in the technology sector left the market wary which led to sharp declines in the high beta arena.

As a result the market moved into a short-term ‘very oversold’ state which typically means that a short-term bounce is imminent (1-3 days).

I made a trade in the ETF Extremes strategy on Thursday morning and currently the trade is in the red. If the market had not moved into a short-term ‘very oversold’ state so quickly I would have taken the trade off for a loss, but given the ‘very oversold’ state of the QQQQ and the low RSI Wilder (2) I decided to hold onto the position. Only time will tell if the decision was a wise one.

I am also looking at a trade in the Sector ETF Extremes strategy early next week so stay tuned for that as well. Currently XLE and XLB are the ETFs of choice for a trade, but I will know more for certain as we enter the trading day Monday. Until then have a wonderful rest of the weekend!



Overbought-Oversold levels for January 31, 2010

ETF Extremes Options Trading Strategy

* S&P 500 (SPY) – 19.0 (very oversold)
* Dow Jones (DIA) – 18.6 (very oversold)
* Russell 2000 (IWM) – 21.9 (oversold)
* NASDAQ 100 (QQQQ) – 17.3 (very oversold)

Sector ETF Extremes Options Strategy

* Biotech (IBB) – 31.8 (neutral)
* Consumer Discretionary (XLY) – 30.6 (neutral)
* Health Care (XLV) – 31.5 (neutral)
* Financial (XLF) – 19.4 (very oversold)
* Energy (XLE) – 11.3 (very oversold)
* Industrial (XLI) – 19.0 (very oversold)
* Materials (XLB) – 12.1 (very oversold)
* Real Estate (IYR) – 27.0 (oversold)
* Retail (RTH) – 42.2 (neutral)
* Utilities (XLU) – 21.1 (neutral)

Ultra Extremes

* Ultra Long (SSO) – 18.4 (very oversoldl)
* Ultra Short (SDS) – 81.1 (very overbought)