August 17, 2017

Will Our Expectations Come to Fruition?

We all were witness the so-called Summer's Gap that occurred at the open this morning. Unfortunately, for the bulls, the short-term very overbought state was too much. All of the major indices sold off near the close. But wait, not all is lost. The Overbought/Oversold indicator indicates that we still have quite a few short-term extremes left in the market. The most notable are GLD and SDS on the oversold side of things. DIA and XLP reside in opposite territory as they are both firmly entrenched in a very overbought state. I put on a few trades today for my subscribers with one of the aforementioned ETFs included in the mix. It was just too good of a spot to ignore a trade...a gap higher into a short-term overbought state while … [Read more...]

Can the Dow (DIA) Continue at this Pace?

I think the answer is obvious. The Dow pushed higher for the 10th consecutive trading day. The Dow hasn't seen a streak like this in over 17 years. Three months into the year, the Dow has shot up nearly 11 percent while the S&P 500 has gained 9.6 percent.                                     For those of you familiar with the normal distribution model, the Dow is on now firmly entrenched in the  tail portion of the curve. Basically, when we see a streak like what we are currently witnessing in the major market indices a correction is not far behind. Think about it for a second. The … [Read more...]

Bulls Beware…Major Indices at Historic Extremes

Yes, the market has rallied in the face of, well, almost everything. While I have my doubts about the sustainability of the current rally I'm not going to give you the reasons why...because it's only my opinion and as we all know when using a statistical approach towards investing/trading opinions are essentially useless. The Russell 2000 (IWM), S&P 500 (SPY) and Dow (DIA) have recently pushed to all-time highs which has pushed our High-Probability, Mean Reversion indicators to extreme overbought states. Moreover, if you look at the RSI over various timeframes you will quickly notice that most of the ETFs I follow are pegged right now. Typically, when this time of reading occur we see a decent decline short-term decline going … [Read more...]

It’s All About the New Year’s Gap. Will it Close? If so, When?

The small caps,  as seen by the Russell 2000 ETF (NYSE:IWM), remain the most resilient of all sectors within the market. The Dow (DIA), S&P 500 (SPY) and Nasdaq 100 (QQQ) have pushed back into neutral states. Since the upside gap on 1/2 the major benchmarks have struggled to advance. The large gap underneath seems to be weighing on the market which makes me more apt to lean towards the bearish side until the gap is resolved. Of course, as we all know we could see another push towards the upside, but again, with out-of-the-money credit spreads I can create a margin for error that allows me to be absolutely wrong in my assumption, yet still profit from on the trade. It all comes down to probabilities. If we are able to go out to the … [Read more...]

Market Remains Range-Bound – Options Strategy Remains Patient

The anticipated bounce occurred today. However, I would not get overly excited because the rally could be short-lived. The S&P 500 ETF (SPY) gapped higher at the open today and never moved lower to close the gap. I would expect to see a close at $128.24 in SPY before the market is able to make any ground. We are already nearing an oversold state in my shortest-term indicators, so it could be a tough few days for the bulls. Although, as long as SPY is able to hold the March lows I think the market could be okay. When I say okay, I mean a move back near the top of the established trading range - $125-$137. If SPY pushed through strong support at the $125 level then I think we could se a waterfall decline that could take us as low … [Read more...]