July 21, 2017

The Talking Heads Are At It Again!

The seasonal end/beginning of the month bullish tendencies coupled with some short-term oversold levels helped to push the market higher today. The news out surely could not perceived as good or could it. I think any sane person can see that the economy still has some struggles to work through.

I typically never watch or listen to the talking heads, but today’s advance caught my curiosity so I decided to use the CNBC tab on the Thinkorswim software. What did I hear? Well, what a surprise the sentiment was slanted to the bullish camp. The bottom is in, buy now. Really? One day of trading and this is what the bright minds of the financial media conclude? Of course they (and many of the analysts they interviews) could be right in their conclusion but before we make any such statements should we not see what the most anticipated economic news of the week states? I certainly think so.

Anyway, I was hoping for a gap lower today to that I could see another signal in the QQQQ Gap Fade strategy which is up 24.2% since it was initiated in early Feb ’08. As we all know that situation didn;t play out, but with some decent news tomorrow we could see a gap to the upside this time. However, the futures are pointed lower as I write this so it doesn’t look good. That is perfectly fine with me. As always I will patiently allow the signals to come to me and then react accordingly. My strategies sit on the sidelines and wait for high probability set-ups and as you can see by the performance in all the strategies the less you trade the better.

The ETFs that I follow are back in a neutral state other than the Energy (XLE) and Utility (XLU) sectors. XLE could be a Sector ETF Extremes candidate if I continue to see further downside over the coming days, but XLU, even though it is in a short-term oversold state is not on my radar. Why? Because my shortest-term proprietary oversold/overbought measures actually have a higher reading than the short-term oversold/overbought screen that I use on this blog.

A further short-term advance would certainly push the major benchmarks and the sector I follow into an overbought state. This could lead to a short-term reprieve or choppy conditions at best.

Check out the following Russell (RUT) chart by Tim Knight (the chart guru in my opinion). Again, a short-term advance to the levels stated on his chart would certainly push the index (in my case the IWM) and the other ETFs I follow into a short-term overbought state. If this occurs I expect to see a few signals in the Extremes strategies, but as we all know only time will tell. Stay tuned!

Have a wonderful evening!


Overbought/Oversold levels for July 29, 2008

ETF Extremes Options Strategy

* S&P 500 (SPY) – 55.4 (neutral)
* Dow Jones (DIA) – 52.9 (neutral)
* Russell 2000 (IWM) – 62.3 (neutral)
* NASDAQ 100 (QQQQ) – 56.7 (neutral)

Sector ETF Extremes Options Strategy

* Biotech (IBB) – 89.3 (very overbought)
* Consumer Discretionary (XLY) – 52.8 (neutral)
* Health Care (XLV) – 65.4 (neutral)
* Financial (XLF) – 58.4 (neutral)
* Energy (XLE) – 27.0 (oversold)
* Industrial (XLI) – 60.1 (neutral)
* Materials (XLB) – 57.9 (neutral)
* Real Estate (IYR) – 66.1 (neutral)
* Retail (RTH) – 57.7 (neutral)
* Utilities (XLU) – 26.5 (oversold)

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