July 28, 2017

Short-Term High-Probability, Mean-Reversion Indicator – Bounce for Brazil (EWZ)?

The market moved lower today and as a result most of the ETFs that I follow in the High-Probability, Mean-Reversion strategy have moved into a neutral state.As reported by Jason Goepfert over at SentimenTrader, today marked the first time since 1980 that the S&P hit a 52-week then closed at a 10-day low one trading day after. This has happened 8 other times and 7 out of 8 have been negative a month later with an average return of approximately -4.5%.

Health Care (XLV) , Brazil (EWZ) and China (FXI) have all moved into a “very oversold” state, but the only one that currently has an RSI (2) below 5 is EWZ (2.9). Both EWZ and FXI are borderline right now, but a push lower at the open Monday would surely bring the RSI (2) of both below 5.

Indeed, if the market opens lower Monday and EWZ, FXI and EWZ follow suit there could be another trade signal in the High-Probability, Mean-Reversion strategy. Subscribers stay tuned.

It was another good week for the strategy. I was able to get out of the USO trade towards the end of the day Wednesday for a gain of 7.9%. The strategy is up 6.5% for the month and 22.5% since its inception roughly 3 months ago. The strategy is averaging a monthly gain of 6.6%. This is right on track with my expectations of 5.0% a month.Moreover,  the Sharpe ratio is currently over 3 with a max drawdown of only 8.6%.

To say I am happy with the performance of the newsletters  strategy would be an understatement.

You can check out the results here: http://high-probability-etf.collective2.com

As always, if you have any questions or comments please do not hesitate to email me.

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Short-Term High-Probability, Mean-Reversion Indicator – as of close 1/28/11

Benchmark ETFs

* S&P 500 (SPY) – 33.8 (neutral)
* Dow Jones (DIA) 35.3 (neutral)
*Russell 2000 (IWM) – 35.0 (neutral)
* NASDAQ 100 (QQQQ) – 35.2 (neutral)

Sector ETFs

*Biotech (IBB) – 28.6 (oversold)
Consumer Discretionary (XLY) – 26.0 (oversold)

Health Care (XLV) – 18.8 (very oversold)

* Financial (XLF) – 37.0 (neutral)
* Energy (XLE) – 59.8 (neutral)
* Gold Miners (GDX) – 44.6 (neutral)
Industrial (XLI) – 40.7 (neutral)
Materials (XLB) – 39.2 (neutral)
*Real Estate (IYR) – 56.1 (neutral)
* Retail (RTH) – 35.7 (neutral)
Semiconductor (SMH) – 52.9 (neutral)
* United States Oil Fund (USO) – 55.3 (neutral)
* Utilities (XLU) – 33.9 (neutral)

International ETFs

* Brazil (EWZ) – 17.3 (very oversold)
* China 25 (FXI) – 17.9 (very oversold)
* EAFE (EFA) – 37.4 (neutral)
* South Korea (EWY) – 38.9 (neutral)

Commodity ETFs

* Gold (GLD) – 44.8 (neutral)

Ultra Extremes

* Small Cap Bear 3x (TZA) – 63.1 (neutral)
* Small-Cap Bull 3x (TNA) – 34.2 (neutral)
UltraLong QQQQ (QLD) – 35.0 (neutral)
* Ultra Long S&P 500 (SSO) – 33.6 (neutral)
* Ultra Short S&P 500 (SDS) – 65.5 (neutral)
UltraShort 20+ Treasury (TBT) – 44.7 (neutral)

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