Oversold levels dominated the market coming into “fed day”, but I am
never a fan of taking a position ahead of an event that can move the
market against you (and your position) in a matter of seconds. In
options trading such a quick move can be devastating to a position,
which is why the risk/reward always prohibits me from placing a trade
ahead of major market moving events.
Interestingly enough the DOW (DIA) and the Industrials (XLI) are
still in an oversold state and with the post-fed reversal that
typically occurs a day or two after the release we could see a
short-term extreme reading in both of these ETFs over the coming days.
My hope was to see a washout today so that I could place a few trades
in our options extremes strategies, but the market just didn’t want to
cooperate. Remember, opportunities are made up easier than losses.
Have a great night.
Andrew
Overbought/Oversold Levels for June 25, 2008
ETF Extremes Options Strategy
* S&P 500 (SPY) - 32.3 (neutral)
* Dow Jones (DIA) - 19.8 (oversold)
* Russell 2000 (IWM) - 37.3 (neutral)
* NASDAQ 100 (QQQQ) - 46.4 (neutral)
Sector ETF Extremes Options Strategy
* Biotech (IBB) - 61.7 (neutral)
* Consumer Discretionary (XLY) - 34.6 (neutral)
* Health Care (XLV) - 58.1 (neutral)
* Financial (XLF) - 30.3 (neutral)
* Energy (XLE) - 49.3 (neutral)
* Industrial (XLI) - 21.8 (oversold)
* Materials (XLB) - 32.7 (neutral)
* Real Estate (IYR) - 35.7 (neutral)
* Retail (RTH) - 46.9 (neutral)
* Utilities (XLU) - 60.3 (neutral)
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