July 28, 2017

Russell Officially Hits Overbought Status

I reported yesterday about the how the market was entering a short-term seasonal bullish period and the precedent ceratainly did not disappoint today. After a nice gap up the market vacillated in a fairly tight range for most of the day and then began to rally with 45 minutes left to the closing bell.  

As I write this the futures have spiked significantly higher. If the upward momentum holds into the opening bell we could see the shortest-term oversold/overbought indicator we follow (not published) hit an overbought extreme.

If you notice below most of the indices we follow are nearing an overbought situation. Since the low established last Thursday (137.00 on SPY) the market has gained $9.65 without nary a pause so an overbought status is not surprising. Typically, this type of reading means that a short-term top is being established and a slight correction is near. Time will tell.

Now that the market was able to push the S&P above top of the recent trading range (1450) we will look for that level as an area of support if the market does take a pause and possibly take back some of the gains. Watch closely!

Again, due to the 5-week cycle in September expiration I will establish a position next week. At the same time I will also establish a similar position in SPY so that we can compare how the two react to the market on an individual basis.

Also, next week I will begin the SPY LEAPS strategy which I will discuss in great detail in the daily commentary section. I will utilize the paper trade tool in Thinkorswim to accurately report all of the details including greeks, etc. Stay tuned!

Overbought/Oversold for August 22, 2007

SPY – 65.4 (neutral)

IWM – 70.5 (overbought)

DIA – 45.9 (neutral)

QQQQ – 64.4 (neutral)

GLD – 47.0 (neutral)

OIH – 53.7 (neutral)

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Andrew Crowder, www.crowderinvestments.com