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...]

Have We Lost Our Minds

If you haven’t already, don’t forget to sign-up for my : Free Weekly Options Report High-Probability, Mean-Reversion Options Strategy : Free 30-day trial Theta Driver Options Strategy (limited room available): Free 30-day trial Twitter? Join Here. Also, for those of you who live on Facebook. You can access my info there as well. Just click on LIKE. … [Read more...]

Allow Yourself a Margin for Error – Trade Credit Spreads

Okay, I think we all know my bias at this point. For those who don't, it's bearish. I am not going to bother going into why I am bearish. Just read my posts from the last few weeks to truly understand why I am currently bearish. So, I want to talk about something more important today - strategy. More specifically options strategies. With options, you can control with precision, the amount of risk and type of risk you wish to take in any given trade in any situation. One of my favorite strategies is selling vertical call/put spreads like in the Theta Driver Options Strategy. Let me explain. And please understand I am keeping it simple for conceptual reasons. Once, you understand the basics we can really dig deep to understand … [Read more...]

Some Interesting Probabilities Surrounding Payrolls

Will the beginning of the "anticipated" correction come tomorrow? The Nonfarm Payroll report is often a market mover and I expect to see much of the same tomorrow. The market is wound tight and typically when that occurs we are witness to a large directional move. I expect, regardless of how positive (or negative) the report is tomorrow, the market will push lower. As most of my loyal readers know (and thank you all for the amazing support by the way) there has not been a shortage of bearish indicators as of late. Over the past two weeks, with volatility drying up (VIX now in the low 18's) due to the tight trading range over the past two weeks, bearish indicators have piled up and have reached extreme proportions. I compare it … [Read more...]

All it Takes is One Bad Trade

I came across a great article on the one bad trade syndrome. Several months ago, Slopers (Tim Knight’s Band of Followers), were privy to a real-life blow-up in which a trader essentially risked all of his trading capital on essentially one trade(disregarded the importance of position-sizing). I want to make sure that I never make the same mistake. Currently, my positions are teetering on max pain (stop-loss). My outlook remains with the pullback scenario that I have mentioned repeatedly the past few weeks – short-term bearish. Check out the article - All it Takes is One Bad Trade For those of you who have not been reading my posts the past several weeks, I have been reminding my loyal readers of the following: For several weeks I … [Read more...]

Ignore the Noise. Trade Strategies Based off Probabilities

"What do you think about the latest economic report, data coming out of Europe, etc?" That's a question I often receive. My typical response, I don't care. Okay, that may be a bit harsh, but it is true. For the most part I really don't care about the daily news that flows in and out of the market. I am an options trader. I trade strategies based off probabilities. I create statistical advantages based on my current market assumptions. We must realize that knowing what is going on in the news and knowing how to make money consistently are two separate things. For successful options investors it's about your strategy, your logic, your process, it doesn't matter what you think the market the latest economic report is going to say. I … [Read more...]

Why a Short-Term Decline is Highly-Probable

We witnessed another upside gap today and in my opinion the bears were handed a gift, at least for the short-term. Most of the highly- liquid ETFs I follow here at Crowder Options have pushed into a short-term overbought extreme, with several actually reaching a very overbought extreme. Typically, when we see this type of price action, that is an upside gap into overbought to very overbought territory at strong overhead resistance, a short-term reprieve is to be expected. However, if you recall, I expected to see  a reprieve after last Tuesday's large upside gap, but the gap in the tech-heavy Nasdaq 100 (one of my positions at the moment) has yet to close. But, now that we have seen the all of the major ETFs, SPY, DIA, IWM and … [Read more...]

Major Indices Remain in a Short-term Overbought State

Random Thoughts Three of the top five most short-term overbought ETFs that I follow are major market ETFs. DIA, SPY and IWM (in that order) are currently "very overbought" on a short-term basis. The RSI (2) of SPY and DIA are roughly 96 and above and IWM is not far behind at 92. As I write this the futures are higher and if we open at these levels we will see another test of the recent overhead resistance that has plagued the bulls since last Wednesday's historical surge. As I stated yesterday with DIA and SPY in short-term extreme overbought states coming off huge gaps to the upside and battling with strong overhead resistance the probability for a short-term reprieve is high. However, as we all know, stranger things have … [Read more...]

Options Expiration is Upon Us

As we enter the week of options expiration the bulls and bears are playing a fierce game of tug of war. Europe, more specifically the Euro (FXE), continues to be the leading factor of the huge daily swings and until it is resolved I expect  we will see similar price action going forward. While, four of the five last trading sessions were positive we had an absolutely ugly day on Wednesday and one that could be a precursor of things to come as we move into 2012. The move came as the Italian bond rate pushed above 7%, which many see as a threshold for inevitable Italian default. However, many economists and banks have come out with thresholds far lower than 7%. The loss on Wednesday was the worst one-day percentage drop for the … [Read more...]

Short-Term Reprieve Occurs – Now What?

In my Free Weekly Report this past weekend I spoke about how I thought a short-term reprieve was lurking. I spoke about a return to 1220 and well, we are here already. Now what? The market gapped significantly lower at the open and never looked back. Now all of the ETFs I follow for the options strategies are well within a neutral state. The only ETF that has pushed into a short-term oversold state - TBT. And if the RSI (2) of TBT moves even lower tomorrow I will most likely take another position. Other than that I will be sitting on the sidelines waiting for the next set-up. According to Jason Goepfert: "The Beta Chase Index jumped above 6 on Monday, very unusual for a down day in the market. Part of the reason was that … [Read more...]