August 19, 2017

Potential Options Trade – Short-term Overbought

Market Mumbo Jumbo

The market moved higher today and pushed a few of the sector ETFs near a short-term overbought extreme.

According to Jason Goepfert of Sentimentrader, “Tuesdays are good “bottoming” days, and June is a good bottoming month.  The 14th and 15th trading days of the month are also higher-probability days for a low”. Moreover, the week after June option expiration has been negative 72 percent of the time since the inception of the S&P 500 futures.  Every one of the past 6 years has been negative during this week.

As the market moves ever closer to a short-term overbought I expect another test of the recent lows in SPY. A gap higher at the open in SPY and I will most likely take the first position of the month in the High-Probability, Mean-Reversion Options strategy. Long overdue, but again, I never force a trade –  I always allow the trade to come to me.

Also, I dis not place a credit spread today so stay tuned because tomorrow will be the day. Again, stay tuned.

Options Indicator – Overbought – Oversold

Several of the ETFs I follow in the High-Probability, Mean-Reversion strategy have pushed into a short-term extreme state including UNG, EPI and EPU. If all goes well tomorrow, we could see a trade in one of the aforementioned ETFs or potentially one of the major market benchmarks. Subscribers stay tuned!

You can see all of the performance results for the High-Probability, Mean-Reversion strategy here.

Daily Options Links of Interest

Summary

Same message: Not much has changed over the past few weeks – range-bound trading persists. I appears we could see the markets move sideways for a few more months. Are the summer doldrums already upon us? How long can SPY stay in this range of roughly $126 to $137? The question is, while I continue trading extremes in the HPMR strategy , how can I take advantage of the range bound movement at the same time. You guessed it – a credit spread! I will discuss this further in Weekly Options Report.

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High-Probability, Mean-Reversion Options Indicator