August 19, 2017

Short-Term High-Probability, Mean-Reversion Indicator. Semiconductors and Retail Overbought.

As I stated last week, the day after Thanksgiving is historically bearish. Well, for most of the day the historical tendency held true, but as the day progressed the bulls slowly chipped away at the losses and as a result, two out the four major indices (QQQQ and IWM) managed to close the day higher. Actually, quite a few of the ETFs I follow in my High-Probability, Mean-Reversion Strategy advanced today, but only two managed to reach a short-term overbought extreme: Retail (RTH) and Semiconductors (SMH). Both moved into a short-term overbought territory and the RSI (2) for both pushed above 95. As a result, both on currently on my radar, so subscribers stay tuned tomorrow as you could be receiving a trade alert at the beginning of the … [Read more...]

A Couple of Links

Here are a few links that might be of interest: SPY : How can Mr Market fool us ? Is Silver Sustainable? Interested in Amazon at 160? Looking Like Bear Prints. Have a great night. Kindest, Andy … [Read more...]

S&P (SPY) Heading South? How Far?

As I write this the S&P 500 (SPY) is down $1.28 or 1.1%.  Since 9/20 the S&P has been testing the $115.0 level and has failed to push through and sustain the area strong overhead resistance. Moreover, the S&P has broken the low of the tight trading range that the major market benchmark trading in last week. Is the gap from 9/13 near? A move down to the $111.02 would close the gap and I would close the majority of  My Options Portfolio's month-long SPY puts off the table. Click chart to make larger. According to Jason Goepfert of the, the so-called "smart money", has recently established the largest net position on record by an enormous amount. In the past, the market has waned when these traders have … [Read more...]

Failed Breakout on all the ETFs I follow

The S&P (SPY) gapped higher today to close the last of the overhead gaps on SPY. Guess what happened next? If you guessed a sharp decline then you are right? Is this the final trap for the bulls, at least over the short-term? The decline that followed (and still going lower as I write this post) has moved below what has been a strong area of overhead resistance at $114.73 and is now testing short-term support at the 1130 level on the /ES (S&P futures) or the $113.80 area on SPY. Here are a few good charts from my friends Tim Knight and Serge Farra. I am still holding my SPY puts with the expectation of a close of the 9/14 gap at $111.02 (high from 9/13). As always, please do not hesitate to email me from if you have … [Read more...]

April 13th Gap Closes in SPY

The month of September has certainly not lived up to its historical billing as "the most bearish month for the market". Since the gap up on 9/1 SPY has advanced 7.52%. However, the gains have been on the backs of very low volume. Couple this with what I have been stating over the past few trading days and you can see just how the probability of a short-term decline has increased dramatically. Seasonal weakness, extreme overbought readings and today's close of the 5/13 gap at $114.73 had pushed the high-beta QQQQ to an RSI (2) reading to over 99.5. At the close the RSI (2) had moved to 79.6, but the RSI (3) and (5) remain in an overbought state with an 84.2 and 83.3, respectively. The close of the 5/13 gap was almost picture perfect as … [Read more...]

Extreme Overbought Territory

I stated in the last trade alert today (subscribers only) that as a high probability, mean-reversion trader I thrive on situations where the std. deviation has pushed to extremes. Well, almost every ETF I follow has moved into a short-term extreme after today's rally. The tech-heavy QQQQ's have pushed to 99.9 on the RSi (2). As you can probably guess, a short-term reading this extreme does not occur often. Admittedly, my current position is nearing the max pain area, so I could potentially close out the position (most likely the prior two trades with lower deltas) for a loss if the indice keeps pushing violently high. When exiting a trade I typically look for a  fade of the current direction to a critical area of support/resistance and … [Read more...]

August Ends – My Options Portfolio Continues to Push Higher – Patience Pays

August was another good month for My Options Portfolio. The portfolio gained 15.6% for the month and is now up 74.2%, or $20,392.50 since its inception back in early May 2010. You can see all the trades directly from my ThinkorSwim account on the  Options Portfolio page of the website. If you look at the trades you will notice that I had a total of 9 trades in the month of August, three of which were closing trades from late July. Of the 9, only one, was an outright loser and one was break-even, but with commissions the latter trade was indeed was a loser. The loss was -64.3%, but as you can see my position-size was calculated (roughly 6%), so the loss was minimal to My Options Portfolio as I went on to gain over 15% for the month. In … [Read more...]

Oversold S&P Leads to SPY Trade

The broad market index has pushed into "very oversold" territory with two unclosed gaps overhead. Typically when this occurs, the market will experience a short-term bounce. The RSI (2) is reading 2.4 ad the (5) is sitting at 15.6 so I expect to see a short-term advance over the next few days. How long will the bounce last? Well, I do expect to see the gap from today close which means that a move to the $107.07 level should be reached. However, if that does occur over the next day or so I expect to see further declines so I would not be surprised that once I get out of my trade today (see below) I will most likely step back into another one that leans towards the short side of things. There were a few times today that I thought SPY would … [Read more...]

Where are we headed?

Okay, I have a few links of interest for all of you before I get into the post. Where is the SPY headed over the short-term? Lessons From Irwin T. Yamamoto Independent Trading: Pros & Cons So, today was quite interesting to say the least. The market rallied before the open only to close near the lows of the day. Sure, it looks bearish and I think over the next few months we are headed lower, but I think over the short-term we should see a decent bounce. Here are just a few reasons why I think we could see a nice advance over the next 5-10 days. The large gap in all of the major indices (plus almost all sector ETFs) from 6/29 has yet to close All of the major indexes have moved into a short-term oversold extreme … [Read more...]

New IWM Position – Old Trades Posted

First I want to post the trades from Tuesday from my Thinkorswim account. Even with the two losses, the two trades in IWM made up for both losing trades and My Options Portfolio is now up 30.0% or $8,282.50. To check the results click here. As always I will also post the trades directly from my Thinkorswim account at the end of the month. You can also see them in the options portfolio section of the blog. Transparency is of the utmost importance. At the beginning of the trading day, with IWM down again, my short-term technical studies are telling me that there is a high-probability of a short-term bounce in most of the major indices. Due to the aforementioned I have decided to enter into the following trade: I will be back … [Read more...]