July 21, 2017

Short-Term High-Probability, Mean Reversion Indicator- USO and GLD Hit Overbought Extremes

The holiday-shortened week started with the market in a short-term overbought state. Couple the aforementioned with the seasonally bearish trading day that typically occurs  immediately following options expiration and one can quickly see why a short-term decline seemed likely.

However, no one could have ever predicted the madness that occurred in Libya.

The violence in Libya led to a 9% increase in oil prices and was the major catalyst to the 1.4% decline in the Dow (DIA). The uncertainty surrounding the middle east pushed USO and GLD into a short-term overbought state. Both have RSI (2) readings above 98.

The decline helped to push the current position in the High-Probability, Mean-Reversion Strategy back into a profitable state. If the market opens lower tomorrow I will most likely take the profits off the table so subscribers stay tuned for the possibility of an email or tweet.

If tomorrow goes well this will make the seventh straight profitable trade in the strategy for a 100% win ratio. The strategy started back in early November. I will be back with full details on the trade tomorrow.

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Short-Term High-Probability, Mean-Reversion Indicator – as of close 2/16/11

Benchmark ETFs

* S&P 500 (SPY) – 34.9 (neutral)
* Dow Jones (DIA) 41.0 (neutral)
*Russell 2000 (IWM) – 38.3 (neutral)
* NASDAQ 100 (QQQQ) – 22.7 (oversold)

Sector ETFs

*Biotech (IBB) – 28.9 (oversold)
* Consumer Discretionary (XLY) – 39.4 (neutral)
* Health Care (XLV) – 38.4 (neutral)
* Financial (XLF) – 26.4 (oversold)
* Energy (XLE) – 62.0 (neutral)
* Gold Miners (GDX) – 67.2 (neutral)
* Industrial (XLI) – 28.6 (oversold)
* Materials (XLB) – 30.5 (neutral)
*Real Estate (IYR) – 48.4 (neutral)
* Retail (RTH) – 33.9 (neutral)
* Semiconductor (SMH) – 33.6 (neutral)
* United States Oil Fund (USO) – 82.1 (very overbought)
* Utilities (XLU) –37.6 (neutral)

International ETFs

* Brazil (EWZ) – 42.8 (neutral)
* China 25 (FXI) – 29.0 (oversold)
* EAFE (EFA) – 31.1 (neutral)
* South Korea (EWY) – 22.4 (oversold)

Commodity ETFs

* Gold (GLD) – 88.1 (very overbought)

Ultra Extremes

* Small Cap Bear 3x (TZA) – 59.0 (neutral)
* Small-Cap Bull 3x (TNA) – 37.6 (neutral)
*UltraLong QQQQ (QLD) – 22.3 (oversold)
* Ultra Long S&P 500 (SSO) – 34.4 (neutral)
* Ultra Short S&P 500 (SDS) – 64.4 (neutral)
* UltraShort 20+ Treasury (TBT) – 27.3 (oversold)

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