Patience Pays

We were greeted to our first snowfall this morning which has made the day quite beautiful. Autumn colors mixed with a dusting of winter goodness cures all ills, well, maybe most.

Anyway, volatility once again picked up today with the VIX touching a high of 81.45 today before backing off to close at 69.65.

I am watching QQQQ closely right now for a move back to $29.25. This could potentially be a decent area for a potential trade and one that I will be monitoring closely over the next few sessions. If the ETF tests the recent low while pushing back into an extreme short-term oversold state I would imagine a signal will occur in the ETF Extremes strategy.

Jason Goepfert of sentimentrader.com stated the following today:

So I’m still basically doing nothing.  This market is trying almost everyone’s patience – the shorts are awfully scared of another reversal and the longs are even more scared that we won’t get one.  I’ve been operating under the idea that October 10th marked the low for the quarter, and am not changing that at the moment.  That means I want to try to take advantage of short-term oversold readings to get into long-side trades, but until we see a clear setup I think the penalty for being too early on only a marginal setup is too great a risk.  If we have indeed seen the low, then there should be plenty of opportunities over the next couple of months.

Other then calling the Oct. 10 low, I think his “sentiments” fall in line with my line of thinking at the moment. I will continue to patiently wait on the sidelines for a high-probability opportunity to present itself. Our flagship strategy, the ETF Extremes options strategy has been on the sidelines for a few months now and as a result has gained roughly 40% on the major market benchmarks. As I have stated repeatedly over the life of my service (roughly 3 years), cash is a position. Investing/trading takes patience. However, in the case of the ETF Extremes strategy, patience pays.

Overbought-Oversold levels for October 22, 2008

ETF Extremes Options Trading Strategy

* S&P 500 (SPY) – 35.8 (neutral)
* Dow Jones (DIA) – 36.9 (neutral)
* Russell 2000 (IWM) – 34.1(neutral)
* NASDAQ 100 (QQQQ) – 34.4 (neutral)

Sector ETF Extremes Options Strategy

* Biotech (IBB) – 33.6 (neutral)
* Consumer Discretionary (XLY) – 27.2 (oversold)
* Health Care (XLV) – 45.2 (neutral)
* Financial (XLF) – 33.9 (neutral)
* Energy (XLE) – 36.1 (neutral)
* Industrial (XLI) – 32.8 (neutral)
* Materials (XLB) – 32.0 (neutral)
* Real Estate (IYR) – 23.6 (oversold)
* Retail (RTH) – 31.2 (neutral)
* Utilities (XLU) – 41.8 (neutral)

Ultra Extremes (Insiders Page Only)

* Ultra Long (SSO) – 31.3 (neutral)
* Ultra Short (SDS) – 62.5 (neutral)

If you would like to follow my strategies with real-time alerts or have them auto-traded by a participating broker please click the following link! Try my options trading strategies.