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It was just another day in the park for the bulls. The continued push since the gap became higher on Jan. 3 has managed to push the tech-heavy QQQQ into a short-term “very overbought” extreme with an RSI (2) at 98.4. As I always state, when an ETF typically reaches an extreme of this manner, the market fades over the short-term (1-3 days). A move that pushes QQQQ lower would likely close the gap at $54.62, which would mean a 3.5% loss for the QQQQ.

A move like this would certainly be advantageous for my current open positions in both the High-Probability and Mean-Reversion strategy. Yes, I took a position later in the afternoon in the tech-heavy index and so far I like the probability on this one. All of the short-term technical indicators that I follow are reading extremes, so I had no choice but to take a position.

Intel (NASDAQ:INTC) comes out after the bell tomorrow and should be quite the catalyst for the QQQQ’s next move. I would love to say that the next move is definitely going to be bearish over the short-term, but as we all know in trading, even when M-R probability is leaning heavily towards your side, there are no guarantees.

Short-Term High-Probability, Mean-Reversion Indicator – as of close 1/11/10

Benchmark ETFs

  • S&P 500 (NYSEARCA:SPY) – 83.7 (very overbought)
  • Dow Jones (NYSEARCA:DIA) –75.3 (overbought)
  • Russell 2000 (NYSEARCA:IWM) – 69.3 (neutral)
  • NASDAQ 100 (QQQQ) – 90.2 (very overbought) / RSI (2) – 98.5

Sector ETFs

  • Biotech (NASDAQ:IBB) – 76.8 (overbought)
  • Consumer Discretionary (NYSEARCA:XLY) – 57.0 (neutral)
  • Health Care (NYSEARCA:XLV) – 83.1 (very overbought)
  • Financial (NYSEARCA:XLF) – 74.1 (overbought)
  • Energy (NYSEARCA:XLE) – 79.8 (overbought)
  • Gold Miners (NYSEARCA:GDX) – 42.3 (neutral)
  • Industrial (NYSEARCA:XLI) – 90.9 (overbought) / RSI (2) – 98.7
  • Materials (NYSEARCA:XLB) – 81.9 (very overbought)
  • Real Estate (NYSEARCA:IYR) – 54.5 (neutral)
  • Retail (NYSEARCA:RTH) – 48.9 (neutral)
  • Semiconductor (NYSEARCA:SMH) – 88.6 (very overbought)
  • United States Oil Fund (NYSEARCA:USO) – 65.2 (neutral)
  • Utilities (NYSEARCA:XLU) – 64.6 (neutral)

International ETFs

  • Brazil (NYSEARCA:EWZ) – 69.8 (neutral)
  • China 25 (NYSEARCA:FXI) – 73.1 (overbought)
  • EAFE (NYSEARCA:EFA) – 73.5 (overbought)
  • South Korea (NYSEARCA:EWY) – 75.4 (overbought)

Commodity ETFs

  • Gold (NYSEARCA:GLD) – 56.5 (neutral)

Ultra Extremes

  • Small Cap Bear 3x (NYSEARCA:TZA) – 29.1 (oversold)
  • Small-Cap Bull 3x (NYSEARCA:TNA) – 69.4 (neutral)
  • UltraLong QQQQ (NYSEARCA:QLD) – 91.5 (very overbought) / RSI (2) – 98.8
  • Ultra Long S&P 500 (NYSEARCA:SSO) – 84.3 (very overbought)
  • Ultra Short S&P 500 (NYSEARCA:SDS) – 15.5 (very oversold)
  • UltraShort 20+ Treasury (NYSEARCA:TBT) – 62.8 (neutral)
Source: Tech-Heavy ETF Hits Short-Term Extreme - High Probability of Reverting to Mean?