August 17, 2017

Short-Term High-Probability, Mean-Reversion Indicator. Tech-Heavy ETF Hits Short-Term Extreme.

It was just another day in the park for the bulls. The continued push since the gap higher on 1/3 has  managed to push the tech-heavy QQQQ into a short-term “very overbought” extreme with an RSI (2) at 98.4. As I always state, when an ETF typically reaches an extreme of this manner the market fades over the short-term (1-3 days). A move that pushes QQQQ lower would likely close the gap at $54.62 which would mean a 3.5% loss for the QQQQ.

A move like this would certainly be advantageous for my current open positions in both of the High-Probability, Mean -Reversion strategy. Yes, I took a position later in the afternoon in the tech-heavy index  and so far I like the probability on this one. All of the short-term technical indicators that I follow are reading extremes so I had no choice but to take a position.

Intel comes out after the bell tomorrow and should be quite the catalyst for the QQQQ’s next move. I would love to say that the next move is definitely going to be bearish over the short-term, but as we all know in trading, even when MR. Probability is leaning heavily towards your side, there are no guarantees.

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Short-Term High-Probability, Mean-Reversion Indicator – as of close 1/11/10

Benchmark ETFs

* S&P 500 (SPY) – 83.7 (very overbought)
* Dow Jones (DIA) –75.3 (overbought)
* Russell 2000 (IWM) – 69.3 (neutral)
* NASDAQ 100 (QQQQ) – 90.2 (very overbought) / RSI (2) – 98.5

Sector ETFs

*Biotech (IBB) – 76.8 (overbought)
*
Consumer Discretionary (XLY) – 57.0 (neutral)
* Health Care (XLV) – 83.1 (very overbought)
*
Financial (XLF) – 74.1 (overbought)
* Energy (XLE) – 79.8 (overbought)
*
Gold Miners (GDX) – 42.3 (neutral)
* Industrial (XLI) – 90.9 (overbought) / RSI (2) – 98.7
*
Materials (XLB) – 81.9 (very overbought)
*
Real Estate (IYR) – 54.5 (neutral)
* Retail (RTH) – 48.9 (neutral)
* Semiconductor (SMH) – 88.6 (very overbought)
*
United States Oil Fund (USO) – 65.2 (neutral)
* Utilities (XLU) – 64.6 (neutral)

International ETFs

* Brazil (EWZ) – 69.8 (neutral)
* China 25 (FXI) – 73.1 (overbought)
* EAFE (EFA) – 73.5 (overbought)
* South Korea (EWY) – 75.4 (overbought)

Commodity ETFs

* Gold (GLD) – 56.5 (neutral)

Ultra Extremes

* Small Cap Bear 3x (TZA) – 29.1 (oversold)
* Small-Cap Bull 3x (TNA) – 69.4 (neutral)
*UltraLong QQQQ (QLD) – 91.5 (very overbought) / RSI (2) – 98.8
* Ultra Long S&P 500 (SSO) – 84.3 (very overbought)
* Ultra Short S&P 500 (SDS) – 15.5 (very oversold)
*
UltraShort 20+ Treasury (TBT) – 62.8 (neutral)

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Kindest,

Andy