Will the week of options expiration be witness to another short-term extreme?

I am still overwhelmed with emails from last week regarding the ETF Extremes strategy (among the various other strategies I follow). The long-term success in the ETF Extremes options strategy is finally being realized after a 2 1/2 year track record and the recent response shows. I will try and get to all of the emails in an orderly and timely fashion. I just want to remind everyone that I do put a cap on subscribers at 100 per strategy (keeps the emails down, liquidity reasons, etc) so if you wish to join please keep this in mind as each day the strategies get closer to the max.

If you wish to see the post from last week about the long-term performance (including commissions and the monthly subscription fee) please click here.

Okay, now on to the current market environment. Today brought a wave of buyers or should I say a lack of sellers, because volume was rather low. The bears were obviously in hiding in possible preparation for the upcoming short-term reprieve that will most likely occur over the next few days. Of course, no one knows for certain which way the market is headed, but given the recent short-term extremes in the market the probability of a short-term decline looks likely.

The higher-beta indexes (QQQQ, IWM) have entered an overbought state and intraday were well in a ‘very overbought’ state. My short-term proprietary overbought/oversold model is still has some room left on the upside before a trigger is signaled.

The Sector ETF Extremes strategy has several sectors with similar readings as the aforementioned indexes, but certainly another push would trigger another signal in either the XLV, XLY, RTH, or IYR.

That is about it for today. The week of options expiration can often be a tough read for traders. As always I will be patiently waiting on the sidelines for an extreme to enter the market. Until then have a wonderful and relaxing evening.

Andy

Overbought/Oversold levels for August 11, 2008

ETF Extremes Options Strategy

* S&P 500 (SPY) – 68.4 (neutral)
* Dow Jones (DIA) – 68.2 (neutral)
* Russell 2000 (IWM) – 78.2 (overbought)
* NASDAQ 100 (QQQQ) – 77.2 (overbought)

Sector ETF Extremes Options Strategy

* Biotech (IBB) – 62.9 (neutral)
* Consumer Discretionary (XLY) – 79.1 (overbought)
* Health Care (XLV) – 75.7 (overbought)
* Financial (XLF) – 60.8 (neutral)
* Energy (XLE) – 33.5 (neutral)
* Industrial (XLI) – 63.4 (neutral)
* Materials (XLB) – 39.2 (neutral)
* Real Estate (IYR) – 70.5 (overbought)
* Retail (RTH) – 77.8 (overbought)
* Utilities (XLU) – 63.4 (neutral)

If you would like to follow my strategies with real-time alerts or have them auto-traded by a participating broker please click the following link! Try our strategies for a 30 day risk-free trial!