No Gap, New Gap Fade Strategy

We did get the gap to the upside that I was hoping for (mentioned in last Friday’s post) and as a result a signal was not triggered in the ETF Extremes strategy.

Many of you have already noticed the changes made to the website over the weekend. Yes, we have added a Gap Fade strategy using QQQQ as the underlying. It is officially available for auto-trade at Thinkorswim. I will be sending out the official guidelines to newsletter subscribers and those of you who have signed up for the Free strategy report.

You will also notice that we took the SPX Iron Condor strategy off the site. We will continue to follow the strategy in the newsletter and continue to give our subscribers our trades much like we have in the past. However, as a newsletter subscriber you will not only be able to follow the SPX, but you will also be able to follow our new RUT Iron Condor. In our next issue (out at expiration) I will talk about how the Iron Condor strategies will be traded from this point forward. Position-sizing will be a key element.

As for the current market all of the major indices are back in a neutral state as we enter a fairly negative seasonal period. I expect to see oversold conditions (or at least I hope to see) in the next week or so. This will once again bring us back to a situation where a signal is likely. At this point, I am just sitting on my hands and patiently waiting, but I have been doing this for months now to no avail. Yes, our signals, or lack thereof, have kept me out of this whirlwind of a market, and have allowed the strategy to maintain its current gains of 113% since its inception almost two years ago, but that still doesn’t hide the fact that I am getting extremely (no pun intended) frustrated.

I guess I should not complain too much. While the strategy has managed to keep its gains I have watched other services who have strategies that have been around as long if not longer lose absolutely everything. This is another reason why I decided to initiate a gap fade strategy. It allows me to use stop losses unlike the Iron Condors and other similar credit spread strategies. The statistics speak for themselves. I must warn all of you that I will be limiting the subscribers in the Gap Fade strategy between 50-75 for obvious reasons. Anyway. please email me if you have any questions or comments. Have a great night!

Overbought/Oversold for February 1, 2008 

S&P (SPY) – 57.4 (neutral)

Russell 2000 (IWM) – 64.2  (neutral)

Dow (DIA) – 58.9 (neutral)

Nasdaq 100 (QQQQ) - 48.1 (neutral) 

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