After surging higher during the early part of the day the major
benchmarks decided the advance was reason enough to take some of the
short-term gains off the table. The economic struggles continue and
could for quite some time, but that is not how or what I base my
trading on so let us move forward.
Yes, I am finally back after a brief hiatus from the daily grind of
posting on the blog. Over two years of daily posts called for a break
and I will probably take another break after the next two years have
passed. Anyway, the strategies performed well during the hiatus with
the ETF Extremes up almost 40% year-to-date. The strategy is up over
150% since it was initiated back in early 2006. Not bad compared to the
paltry gains of the major benchmarks over that same time frame. Check the performance page.
As expected, after the recent sell-off the major benchmarks, the
Dow, S&P, Russell 2000, and NASDAQ 100 are back in an oversold
state.
This typically means that a short-term bounce is near, but I am not
certain the risk/reward is suitable enough for me to take a short-term
long position. For some reason, I think we could see the aforementioned
benchmarks reach a short-term oversold state before a meaningful bounce
occurs so unless that occurs I will most likely wait this one out on
the sidelines.
If a bounce does occur and moves back into a short-term overbought
state you can bet that I will be taking advantage of this opportunity
to get back into some puts.
I still think the two gaps in the NASDAQ 100 (from 4/16 and 4/18)
will close before the summer months are over so I continue to lean
towards the bearish side over the intermediate-term as well.
I would also like to introduce a new strategy that I will be introducing next week appropriately named Sector ETF Extremes.
It is a short-term stock options strategy that is based on a
technical mix of overbought/oversold extremes in the market. The Sector
ETF Extremes Strategy is the same as the ETF Extremes Strategy with the
only difference being the underlyings of choice.
Biotech (IBB), Consumer Discretionary (XLY), Health Care (XLV),
Financial (XLF), Energy (XLE), Industrial (XLI), Materials (XLB), Real
Estate (IYR), Retail (RTH), Utilities (XLU) are the underlyings of
choice for the Sector Extremes Strategy.
Individuals that look for frequency of trading within a given
strategy are often disappointed with the long-term results. In most
cases, the less you trade, the better you will do in the long run and
the long run is what matters most.
If you wish to join the cost is $49.95 per month which is far less
than the average cost of the ridiculous prices most advisories charge.
I recently traded the aforementioned ETF’s in the Sector ETF Extremes
for my subscribers to view and the results were amazing so I hope to
continue the winning ways much like the other strategies that I offer.
After trading Iron Condors, and other various spread strategies I have
found that buying straight calls and puts with a disciplined approach
towards patience and position-sizing has been the most effective for my
style of trading. This is not to say that that these other strategies
do not work, they do, but I would argue that they have issues
sustaining themselves over the long-term and is that not what really
counts. As I always say our performance speaks for itself. Take care
and have a wonderful afternoon.
Andrew Crowder, Chief Options Strategist, Crowder Investment Research, LLC
Short-term Overbought/Oversold Levels for June 12, 2008
ETF Extremes Options Strategy
- S&P 500 (SPY) - 29.4 (oversold)
- Dow Jones (DIA) - 33.1 (neutral)
- Russell 2000 (IWM) - 30.4 (neutral)
- NASDAQ 100 (QQQQ) - 24.3 (oversold)
Sector ETF Extremes Options Strategy
- Biotech (IBB) - 25.2 (oversold)
- Consumer Discretionary (XLY) - 33.0 (neutral)
- Health Care (XLV) - 16.8 (very oversold)
- Financial (XLF) - 37.3 (neutral)
- Energy (XLE) - 43.9 (neutral)
- Industrial (XLI) - 26.1 (oversold)
- Materials (XLB) - 35.1 (neutral
- Real Estate (IYR) - 30,0 (neutral)
- Retail (RTH) - 40.5 (neutral)
- Utilities (XLU) - 44.7 (neutral)
If you would like to follow my strategies with real-time alerts or
have them autotraded by a participating broker please click the
following link: SUBSCRIBE