August 17, 2017

High-Probability, Mean-Reversion Indicator Screaming Short-Term Overbought

As the old Wall Street adage goes, "don't sell a dull market". The S&P 500 came into the holiday shortened week in a short-term "very oversold" extreme. So the bounce this past week came as no surprise. It was the magnitude of the bounce that surprised many. The S&P as seen through SPY climbed 3.7% in a little over 3 days. But now, the bears are salivating as the pot odds move back to their least over the short-term. As seen in the chart below, not only SPY, but all of the major market ETFs have pushed into a short-term overbought state. Moreover, several sectors have moved into a "very overbought" state. Couple the aforementioned extremes with strong overhead resistance and you can quickly see why the bears … [Read more...]

Short-Term High Probability, Mean-Reversion Indicator – South Korea (EWY) Overbought – VIX Hits Historical Extreme

The trading day began with a small bounce higher which lasted through most of the day. During the final hour sellers finally stepped in and pushed the market lower. Could we see lower prices ahead? I stated the following this weekend: There are lots of bearish signs moving into the market. Over the past week, the VIX has gone from more than 30% above its average to more than 15% below. In the past this type of volatility in volatility has been overwhelmingly bearish. If you just look at 15% both ways there are eight instances when this type of movement has occurred and only once was it bullish for the market one month later. Furthermore, the major market indices are overbought on a short-term basis and nearing overbought on an … [Read more...]

Strategy Continues to Outperform – Up 28.0% Since Inception

A wonderful beginning indeed. The strategy had another successful trade marking the eighth straight winning trade since the strategy was initiated for a win ratio. The return - 28.2%. Check out the results (trades, returns, ratios, etc.) at the following link: High-Probability, Mean-Reversion Strategy Obviously I am pleased with the win ratio (100%) since I initiated the High_-Probability, Mean-Reversion strategy, but I am a realist. I realize there is no holy grail in trading. One thing I do know for certain is that I have a unique, and concrete, options trading strategy that makes the world of sense to me and I trade it to make money over the long-term. Furthermore, I realize that the less I trade, the better my strategy will … [Read more...]