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Short-Term, High-Probability, Mean Reversion Indicator – as of close 10/25

I hope that all of you find the following information useful in your trading endeavors. I will be back later with my daily market commentary.

After being deeply oversold on a short-term basis, Brazil (NYSEARCA:EWZ) bounced back Tuesday, and is now sitting comfortably in a neutral state. The ETF gained of $.70 or 0.92%. The at-the-money EWZ Dec10 76 puts had a net change yesterday of $0.55 or 16.4%.

Even after Tuesday’s failed rally (considering the highs of the day), there are still a few ETFs that I am watching for a potential trade.

The QQQQ is an obvious one that I have added to my short-term watchlist. The tech-heavy index is on the border of being “very overbought” and has a decent RSI (2) rating above 93. I would prefer to see a higher number (greater than 95), but given how heavy the market currently feels I will be watching this one closely tomorrow.

The other is the Real Estate sector (NYSEARCA:IYR), as it has pushed into a “very overbought” state. The RSI (2) is not as high as I would like, but I will be watching this one closely nonetheless for a quick decline.

Benchmark ETFs

  • S&P 500 (NYSEARCA:SPY) – 69.2 (neutral)
  • Dow Jones (NYSEARCA:DIA) – 69.3 (neutral)
  • Russell 2000 (NYSEARCA:IWM) – 65.2 (neutral)
  • NASDAQ 100 (QQQQ) – 79.4 (overbought) / RSI(2) – 93.3

Sector ETFs

  • Biotech (NASDAQ:IBB) –63.2 (neutral)
  • Consumer Discretionary (NYSEARCA:XLY) – 75.7 (overbought) / RSI (2) – 91.7
  • Health Care (NYSEARCA:XLV) – 68.2 (neutral)
  • Financial (NYSEARCA:XLF) – 45.7 (neutral)
  • Energy (NYSEARCA:XLE) – 68.6 (neutral)
  • Gold Miners (NYSEARCA:GDX) – 48.8 (neutral)
  • Industrial (NYSEARCA:XLI) – 67.9 (neutral)
  • Materials (NYSEARCA:XLB) – 66.8 (neutral)
  • Real Estate (IYR) – 80.3 (very overbought) /RSI (2) – 87.8
  • Retail (NYSEARCA:RTH) – 66.8 (neutral)
  • Semiconductor (NYSEARCA:SMH) – 71.2 (overbought)
  • United States Oil Fund (NYSEARCA:USO) – 52.5 (neutral)
  • Utilities (NYSEARCA:XLU) – 39.8 (neutral)

International ETFs

  • Brazil (EWZ) – 36.8 (neutral)
  • China 25 (NYSEARCA:FXI) – 62.9 (neutral)
  • EAFE (NYSEARCA:EFA) – 60.3 (neutral)
  • South Korea (NYSEARCA:EWY) – 42.7 (neutral)

Commodity ETFs

  • Gold (NYSEARCA:GLD) – 52.9 (neutral)

Ultra Extremes

  • Small Cap Bear 3x (NYSEARCA:TZA) – 33.6(neutral)
  • Small-Cap Bull 3x (NYSEARCA:TNA) – 64.1 (neutral)
  • UltraLong QQQQ (NYSEARCA:QLD) – 78.1 (overbought)/RSI (2) – 92.1
  • Ultra Long S&P 500 (NYSEARCA:SSO) – 69.7 (neutral)
  • Ultra Short S&P 500 (NYSEARCA:SDS) – 29.8 (oversold)
  • UltraShort 20+ Treasury (NYSEARCA:TBT) – 51.6 (neutral)

Disclosure: Short SPY and FXI, Long TZA

Source: Short-Term, High-Probability Mean Reversion Indicator: EWZ Bounces Back