Very Overbought – Short-term Decline Looks Imminent

The market as a whole is “very overbought” which typically means a short-term reprieve is imminent. It is quite likely that we could see our forst trade in almost six months in the ETF Extremes Strategy. One thing is certain, the probability of a short-term decline looks very likely and I will be taking a close look at a trade tomorrow morning. Of course, this depends on what the futures are telling me tomorrow morning at the open.

Overbought-Oversold levels for August 3, 2009

ETF Extremes Options Trading Strategy

* S&P 500 (SPY) – 90.8 (very overbought)
* Dow Jones (DIA) – 90.8  (very overbought)
* Russell 2000 (IWM) – 88.5 (very overbought)
* NASDAQ 100 (QQQQ) – 82.2 (very overbought)

Other ETFs

* Ultra Long (SSO) – 89.9 (very overbought)
* Ultra Short (SDS) – 9.9 (very oversold)