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I mentioned yesterday about the market’s bullish tendency for the
end/beginning of the month . I should point out that I typically,
actually I should say, almost never trade based on seasonal tendencies.
However, I do like to use seasonal biases as a tool to push the
probability of a potential position on my side.
That being said, according to my overbought/oversold screen below,
the major benchmarks have pushed close to a short-term overbought
state. While I do not use the numbers bloew to place a trade I do use
htem as the initial screen for potential trades.
Okay, now back to the current market. Tomorrow brings the highly
anticipated GDP which many expect will be a market moving report.
Friday is also a big day for market moving economic reports as the
Nonfarm Payroll report is out.
My guess (but an educated one) is that any short-term gains, if any,
will be given back in early August. Typically, when the market advances
this quickly off of oversold levels we will see at least a short-term
reprieve going forward.
All four of the major benchmarks are still below the recent highs so
their is still some decent overhead resistance in play coupled with
near overbought levels. Just another reason why I think any short-term
move to the upside will be not be sustainable.
Have a wonderful night!
Andy
The Strategies
My hope is to see an inital push to the upside tomorrow morning that
could (depending on the size of the move) lead to a potential Gap and
consequently a Gap Fade signal in the QQQ Gap Fade strategy. I have my
fingers crossed.
As for the sectors I currently have on my radar the Biotech (IBB)
and Materials (XLB) are the chosen few with my trigger finger on IBB.
The Biotech (IBB) sector has pushed into an extreme over many time
frames, but the shortest time frame I use and my proprietary
overbought/oversold indicator are screaming right now so a signal in
the Sector ETF Extremes strategy could be near.
I will be covering position-sizing for the three portfolios (mainly
the ETF Extremes and the Gap Fade) since they have a longer track
record to see how commissions, my monthly subsciption cost and several
other factors affect the overall return of the portfolio. Stay tuned.
Overbought/Oversold levels for July 30, 2008
ETF Extremes Options Strategy
* S&P 500 (SPY) - 67.2 (neutral)
* Dow Jones (DIA) - 64.9 (neutral)
* Russell 2000 (IWM) - 65.5 (neutral)
* NASDAQ 100 (QQQQ) - 60.2 (neutral)
Sector ETF Extremes Options Strategy
* Biotech (IBB) - 90.5 (very overbought)
* Consumer Discretionary (XLY) - 55.8 (neutral)
* Health Care (XLV) - 64.7 (neutral)
* Financial (XLF) - 62.6 (neutral)
* Energy (XLE) - 62.5 (neutral)
* Industrial (XLI) - 67.1 (neutral)
* Materials (XLB) - 71.3 (overbought)
* Real Estate (IYR) - 58.9 (neutral)
* Retail (RTH) - 60.8 (neutral)
* Utilities (XLU) - 54.3 (neutral)
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