The market continued the sell-off today and is now approaching Friday's low. I expect to see the S&P (SPY) touch 149 over the next few days which, if touched, should bring our short-term indicators into a very oversold state. If this does occur I would expect to see a bounce off of this support level although I am not so certain the market will react like it did during the last correction on February 27th.
As I stated in my blog post yesterday it feels different this time. It is highly probable that the market will bounce, but how far and for how long no one knows. I also stated "A move below Friday’s low and the market could be witness to a wave of selling. During the last correction (Feb. 27th) the market moved sharply lower, bounced, tested the lows again and then began the move to new highs. This is typical in a bullish market so a break of this trend could be a warning sign of things to come. However, it is June and if we do see a push higher I would not expect the move upwards to be nearly as fast as last time. As my loyal readers know, I expect to see a trading range over the summer months and firmly believe in the “sell in May and go away” theory particularly this year."
Our SPX Short Iron Condor strategy looks like it will profitable once again this expiration cycle. With only two days (and the open Friday) left we are comfortably situated near the middle of our 140 point range. While the market has tumbled, we should make roughly 9% for the June Cycle. Not bad. If the range bound market continues or if it doesn't move sharply in either direction our Condor Spread Strategy should do very well over the period known as the "summer doldrums".
If you would like to know more about how the intricacies of how we trade our Condor strategy please refer to our White Paper. With the purchase you will receive two free months of our newsletter.
Overbought/Oversold levels for June 12, 2007
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SPY - 32.6 (neutral)
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DIA - 31.5 (neutral)
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IWM - 29.0 (oversold)
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QQQQ - 37.2 (neutral)
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GLD - 28.6 (oversold)
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OIH - 40.2 (neutral)
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Have a great night!
Andrew Crowder, Chief Investment Strategist,
www.crowderinvestments.com