Opportunities are made up easier than losses

The headline says it all. I expected to see the short-term bounce, but did not want to step in due to the increased probability of a capitulation event. The gains would have certainly been nice for the two Extremes strategies but as I always say “opportunties are made up easier than losses”.

The two gaps from April have been closed for several days and now my focus is on the gap from 3/24 in the QQQQ or the $43.07 level.

While the Dow (DIA) and S&P (SPY) have pushed to new lows, the tech-heavy NASDAQ 100 (QQQQ) has yet to do so. Will it see new lows? No one knows for certain, but with the recent decline the probability of QQQQ touching this level and thereby closing the aforementioned gap increases.

I would not be surprised to see the QQQ’s open tomorrow with a decent gap lower. The underlying ETF closed near the lows today and as I write this the futures have pushed lower.

For all of you QQQQ Gap Fade subscribers, as always, if a signal occurs tomorrow we will send out a real-time trade alert with my short-term expectations for the trade. This includes the opening price and a subsequent email with the closing price.

Capitulation could be right around the corner so stay nimble! Enforce strict trading guidelines including position-size, stop-lossses, etc.

Happy trading!

Andy

Overbought/Oversold Levels for July 9, 2008

ETF Extremes Options Strategy

* S&P 500 (SPY) - 29.3 (oversold)
* Dow Jones (DIA) - 29.4 (oversold)
* Russell 2000 (IWM) - 33.6 (neutral)
* NASDAQ 100 (QQQQ) - 37.4 (neutral)

Sector ETF Extremes Options Strategy

* Biotech (IBB) - 69.8 (neutral)
* Consumer Discretionary (XLY) - 33.2 (neutral)
* Health Care (XLV) - 73.6 (neutral)
* Financial (XLF) - 33.5 (neutral)
* Energy (XLE) - 13.9 (very oversold)
* Industrial (XLI) - 33.7 (neutral)
* Materials (XLB) - 13.1 (neutral)
* Real Estate (IYR) - 34.9 (neutral)
* Retail (RTH) - 39.5 (neutral)
* Utilities (XLU) - 55.6 (neutral)

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