Seeking Alpha
Profile| Send Message|
( followers)  

Wednesday, I mentioned how several of the ETFs that I follow in the High-Probability, Mean-Reversion strategy had moved into a short-term “very overbought” extreme. USO and XLE continued to push further into an extreme state Thursday, which will most likely lead to a short-term position in the strategies early next week.

The S&P 500 (NYSEARCA:SPY) has now advanced 13 out of the past 15 trading days. This is the first time since 1971 the market has seen a streak like this extend into December. The other dates were 12/8/59, 12/2/68, 12/7/70 and 12/15/71. The first two led to almost immediate, and severe declines. The latter two led to a continued, and impressive rally. We shall see soon enough how this one plays out, but given the move into a short-term “very overbought”

There are a few other bearish indicators that have moved into a short-term extreme which I will mention in my upcoming monthly report.

Short-Term High-Probability, Mean-Reversion Indicator – as of close 12/23/10

Benchmark ETFs

* S&P 500 (SPY) – 72.5 (overbought)
* Dow Jones (NYSEARCA:DIA) –78.9 (overbought)
* Russell 2000 (NYSEARCA:IWM) – 70.2 (overbought)

* NASDAQ 100 (QQQQ) – 64.2 (neutral)

Sector ETFs

* Biotech (NASDAQ:IBB) – 88.3 (very overbought)
* Consumer Discretionary (NYSEARCA:XLY) – 57.5 (neutral)
* Health Care (NYSEARCA:XLV) – 63.3 (neutral)
* Financial (NYSEARCA:XLF) – 69.2 (neutral)
* Energy (NYSEARCA:XLE) – 80.4 (very overbought) / RSI (2) – 95.5
* Gold Miners (NYSEARCA:GDX) – 29.9 (oversold)
* Industrial (NYSEARCA:XLI) – 67.4 (neutral)
* Materials (NYSEARCA:XLB) – 84.1 (very overbought)
* Real Estate (NYSEARCA:IYR) – 58.2 (neutral)
* Retail (NYSEARCA:RTH) – 75.5 (overbought)
* Semiconductor (NYSEARCA:SMH) – 48.6 (neutral)
* United States Oil Fund (NYSEARCA:USO) – 86.0 (very overbought) / RSI (2) – 98.7
* Utilities (NYSEARCA:XLU) – 63.6 (neutral)

International ETFs

* Brazil (NYSEARCA:EWZ) – 38.6 (neutral)
* China 25 (NYSEARCA:FXI) – 37.2 (neutral)
* EAFE (NYSEARCA:EFA) – 53.7 (neutral)
* South Korea (NYSEARCA:EWY) – 67.7 (neutral)

Commodity ETFs

* Gold (NYSEARCA:GLD) – 42.5 (neutral)

Ultra Extremes

* Small Cap Bear 3x (NYSEARCA:TZA) – 16.1 (very oversold)
* Small-Cap Bull 3x (NYSEARCA:TNA) – 83.1 (very overbought)
* UltraLong QQQQ (NYSEARCA:QLD) – 67.4 (neutral)
* Ultra Long S&P 500 (NYSEARCA:SSO) – 81.6 (very overbought)
* Ultra Short S&P 500 (NYSEARCA:SDS) – 19.2 (very oversold)
* UltraShort 20+ Treasury (NYSEARCA:TBT) – 52.9 (neutral)

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in USO, XLE, DIA over the next 72 hours.

Source: Short-Term, High-Probability, Mean-Reversion Indicator: USO Trade Monday?