June 23, 2017

Options Expiration begins in Lackluster Fashion

The week of options expiration started in a lackluster fashion. After trading lower at the open the market moved slightly into positive territory only to give the gains back during the final hour of trading.

The move today put the tech-heavy Nasdaq 100 (QQQQ) back into an oversold state and once again close to another signal in our ETF Extremes strategy.

On a seasonal nasis the week of options expiration during the month of November has averaged a gain of 1.2% since 1995.  Eleven of the last 13 years have finished the week in the black.

Furthermore, according to Jason Goepfert of Sentimentrader there have been 10 occasions when the S&P have closed Friday by 2% or lower and then proceeded to decline by an additional -0.5% the following Monday. Buying at the open on Monday and holding until Wednesday’s close resulted in 9 out of 10 winners with an average of 2.4%.

The aforementioned statistic coupled with a short-term oversold market and strong support around the 850 area on the S&P has increased the probability of a short-term bounce significantly.

We also have a capitulation day last Thursday that needs to be taken into account.

With all this being said, my intention is to continue to watch for short-term opportunities in the ETF and Sector ETF Extremes strategies over the next few days.

Have a great night!

Overbought-Oversold levels for November 17, 2008

ETF Extremes Options Trading Strategy

* S&P 500 (SPY) – 34.1 (neutral)
* Dow Jones (DIA) – 35.7 (neutral)
* Russell 2000 (IWM) – 33.3 (neutral)
* NASDAQ 100 (QQQQ) – 26.7 (oversold)

Sector ETF Extremes Options Strategy

* Biotech (IBB) – 40.7 (neutral)
* Consumer Discretionary (XLY) – 31.5 (neutral)
* Health Care (XLV) – 35.6 (neutral)
* Financial (XLF) – 26.7 (oversold)
* Energy (XLE) – 42.9 (neutral)
* Industrial (XLI) – 31.9 (neutral)
* Materials (XLB) – 32.9 (neutral)
* Real Estate (IYR) – 34.2 (neutral)
* Retail (RTH) – 32.0 (neutral)
* Utilities (XLU) – 51.2 (neutral)

Ultra Extremes (Insiders Page Only)

* Ultra Long (SSO) – 32.8 (neutral)
* Ultra Short (SDS) – 62.8 (neutral)

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