August 17, 2017

Potential Retest and then Post Expiration Blues?

After the sharp intraday decline the S&P bounced off support levels (1535) late in the trading day and managed to only lose 0.2% on the day. As I write this the futures are up and if they hold overnight we could see a retest of what has been strong overhead resistance (1555) in the coming days.

This type of set up could prove advantageous for short-term (1-3 days) bears as we move into post-options expiration. Historically, post expiration is weak, particularly the trading day following options expiration. Furthermore, as I mentioned late last week the market is in the midst of a seasonally weak period. The next four trading days are historically very weak, especially Friday and Monday. According to the Stock Trader’s Almanac July expiration has seen the “Dow lower 4 out of the last 6 years”. More importantly, since 1985 the Almanac goes on to state that since 1985 the Dow and S&P have only finished those days higher 38.1% and 28%, respectively.

I make it a habit to never trade on seasonality alone, but I always pay attention to which way the seasonal winds are blowing and if the conditions are right and I have the seasonal winds at my back I am more apt to take a position. It can certainly increase the probabilty of a potential trade. This situation could bode well for our ETF Extremes strategy. As always, I will keep subscribers to the strategy posted for any developments that may occur over the coming days. Patience, patience, patience!

It has been a while, but loyal subscribers know that we experienced a similar situation last year and after that frustrating period (at least for me) our cumulative gains increased dramatically. We stick by our guns here. Strategies go through doldrum periods and the inexperienced often become overly frustrated and try to trade through it rather than allowing the signals of their “bread and butter” strategy to present themselves. As we all know this does not work over the long haul. With a win ratio that exceeds 92% we intend on sticking to the guidelines of the ETF Extremes strategy. Why would we not? Our strategy isn’t for everyone, particularly those who want lots of action and that is fine. To each their own! As we say on the site, performance is the sole factor on which all investment strategies should be judged and our performance speaks for itself!

Also, please send me your comments and suggestions on the new site. We are ecstatic about the new site. Success has been our friend and we intend on keeping it that way for a long time.

Overbought/Oversold levels for July 18th, 2007

  • SPY – 65.3 (neutral)
  • IWM – 47.8 (neutral)
  • DIA – 72.8 (overbought)
  • QQQQ – 79.4 (overbought)
  • GLD – 79.5 (overbought)
  • OIH – 42.5 (neutral)

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Have a wonderful night!

Andrew Crowder, Chief Investment Strategist,