Will we see the gaps close?

Not much to say today.  

The overbought market came tumbling back into a neutral state immediately following the Fed announcement today. Typically, after such a large drawdown we will see continued downside momentum over the short-term.

In this instance I have to side with the historical norm due to the  two upside gaps that occurred on 12/5 and 11/27. Gaps tend to weigh heavily on the market and the two mentioned are no expection.

My hope is that the market can quickly push into an oversold state so that I can possibly take advantage of a short-term bounce before the year ends.

The pullback also moved the underlying S&P (SPX) closer to the midpoint of our range for the Iron Condor strategy. Amazingly after all of the volatility SPX would have to move 113 points (7.7%) to the upside or 187 points (12.7%) to the downside before our position is in jeopardy of taking a loss.

• Kirk’s post - “Thoughts on the Fed” - Check it out, great read as always!

Overbought/Oversold for December 11, 2007

S&P (SPY) - 44.5 (neutral)

Russell 2000 (IWM) - 43.7 (neutral)

Dow (DIA) - 48.9 (neutral)

Nasdaq 100 (QQQQ) - 44.8 (neutral)

We work hard to bring you our latest views, opinions and research on a daily basis. If you are a loyal reader and find our thoughts useful please show us your support by joining our newsletter service. We currently follow 3 stock options strategies in our investment newsletter, the ETF Extremes, SPX Short Iron Condor and SPY Diagonal LEAP.

If you want to an in-depth, step-by-step look at how we trade our strategies purchase our acclaimed E-Book! With your purchase you will receive Two Free Months of our investment newsletter plus unlimited access to our Insider’s page enabling you to follow our strategies as you learn. What do you have to lose? Join today!