SPX back near Tuesday’s low. VIX back near Tuesday’s high.

The near Tuesday’s low today. The push lower moved the major benchmarks into “very oversold” territory” which in most cases creates a good opportunity for a short-term play. However, our shortest-term indicators still have a bit of room left on the downside which makes me somewhat hesitant to step in at this juncture. Keep an eye on the 1385-1390 in the SPX. How the market reacts to this level should give us a decent indication where this market is headed over the short to intermediate-term.

The VIX is back up near 19, which was the high on Tuesday. The difference this time around is that the reading is not artificially inflated. One thing is for certain, with volatility back options sellers should be happy. Did everyone actually think premiums were going to remain at historical lows forever? Our SPX Short Iron Condor strategy should be able to get much better prices this upcoming option cycle. Furthermore, I should be able to increase the range size which will increase the probability of expiring within our chosen range.

Again, I am patiently sitting on my hands. My hope is that we have one more oversold flush which will bring our shortest-term oversold indicators back to a level where the probability of a short-term bounce is very likely.

and we will do our best to save you a spot once we make the portfolio live, which will occur after the March expiration cycle.

Overbought/Oversold levels for March 2, 2007

• SPY - 18.0 (very oversold)
• DIA - 16.5 (very oversold)
• IWM - 17.8 (very oversold)
• QQQQ - 16.2 (very oversold)
• OIH - 33.3 (neutral)
• GLD - 27.1 (oversold)

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