I hate to repeat myself, but in this case I think the information is well worth repeating.
Earlier in the week I mentioned that “since the low established in July 2006 the S&P (SPY) has been higher during expiration week 10 out of 11 times. If the market lives up to its recent historical precedent I would expect to see the historically weak period of post options expiration kick in.”
Barring a major setback in the upcoming inflation reports over the next two days the market should be able to continue its winning ways again this week. However, I do expect to see another test to the downside next week. Maybe, not to the recent lows, but at least a decent move to the downside particularly if the market can reach an overbought state going into the week of post expiration. Also, the week after June Triple-Witching has seen the Dow lower 15 out of the last 17 years.
The market has indeed moved higher and is moving ever closer to an overbought state., the S&P (SPY) has moved higher without dipping into negative territory once over the last two days which is often a negative over the short-term. Tomorrow is options expiration so we could see some volatility early. If the market is able to sustain the recent gains tomorrow I would expect to see a signal in the ETF possibly tomorrow or Monday. As always we will keep our loyal subscribers abreast of the situation
With European options settling at the open tomorrow our SPX Short IRon Condors look to be profitable once again with over a 9% profit this month. With the July Expiration lasting five weeks we will not be establishing positions next week. We like to only go out four weeks so we will wait until the following week. This could prove to be advantageous if the market does indeed move lower next week as a move lower will increase the VIX (volatility measure) and will allow us to bring in more premium. We are perfectly happy with gains ranging from 6-10% over the course of four weeks.
Overbought/Oversold levels for June 14, 2007
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SPY - 60.6 (neutral)
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DIA - 61.9 (neutral)
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IWM - 56.4 (oversold)
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QQQQ - 63.0 (neutral)
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GLD - 41.6 (neutral)
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OIH - 70.2 (overbought)
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Have a great night!
Andrew Crowder, Chief Investment Strategist,
www.crowderinvestments.com