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The ETFs used in my High-Probability, Mean-Reversion indicator are mostly in a neutral state, with XLE being the only one in an extreme state. The RSI (2) of XLE is still lower than 95, so a trade will not be considered unless the ETF pushes over that short-term level.

When short-term readings are neutral, patience is required. Overtrading is the downfall to many a trader and strategy.

As I state right on my website:

Patience is the key ingredient to the success of my strategies, and forcing a trade is, in most cases, detrimental to any strategy. My strategies require patience coupled with a disciplined approach. Waiting for the appropriate scenario to recommend trades with a high probability of success is what makes the High-Probability, Mean-Reversion strategy successful.

Losing trades are a definite. It is how they are managed over the long-term that proves the success of a strategy, and I think I have shown over the past few years that I have managed the strategy appropriately. The performance speaks for itself. Capital preservation is one of the key elements of my strategies, and I insist on a disciplined, risk-management approach so that the strategy will have the best chance at long-term success.

I am a realist; I realize there is no holy grail in trading. However, one thing I do know for certain is that I have found a unique and concrete strategy that makes a world of sense to me, and I trade it to make serious money over the long-term. Furthermore, I realize that the less I trade, the better my strategy will perform over the long run -- and the long run is what matters. This is what makes the High-Probability, Mean-Reversion strategy unique and, so far, successful.

Short-Term High-Probability, Mean-Reversion Indicator – as of close 2/02/11
Benchmark ETFs

  • S&P 500 (NYSEARCA:SPY) – 64.7 (neutral)
  • Dow Jones (NYSEARCA:DIA) 69.7 (neutral)
  • Russell 2000 (NYSEARCA:IWM) – 59.4 (neutral)
  • NASDAQ 100 (QQQQ) – 59.5 (neutral)

Sector ETFs

  • Biotech (NASDAQ:IBB) – 48.8 (neutral)
  • Consumer Discretionary (NYSEARCA:XLY) – 44.5 (neutral)
  • Health Care (NYSEARCA:XLV) – 55.6 (neutral)
  • Financial (NYSEARCA:XLF) – 58.5 (neutral)
  • Energy (NYSEARCA:XLE) – 82.9 (very overbought)
  • Gold Miners (NYSEARCA:GDX) – 54.6 (neutral)
  • Industrial (NYSEARCA:XLI) – 63.5 (neutral)
  • Materials (NYSEARCA:XLB) – 69.7 (neutral)
  • Real Estate (NYSEARCA:IYR) – 70.7 (overbought)
  • Retail (NYSEARCA:RTH) – 35.4 (neutral)
  • Semiconductor (NYSEARCA:SMH) – 72.0 (overbought)
  • United States Oil Fund (NYSEARCA:USO) – 58.5 (neutral)
  • Utilities (NYSEARCA:XLU) – 49.0 (neutral)

International ETFs

  • Brazil (NYSEARCA:EWZ) – 37.9 (neutral)
  • China 25 (NYSEARCA:FXI) – 44.6 (neutral)
  • EAFE (NYSEARCA:EFA) – 68.4 (neutral)
  • South Korea (NYSEARCA:EWY) – 61.5 (neutral)

Commodity ETFs

  • Gold (NYSEARCA:GLD) – 47.4 (neutral)

Ultra Extremes

  • Small Cap Bear 3x (NYSEARCA:TZA) – 37.2 (neutral)
  • Small-Cap Bull 3x (NYSEARCA:TNA) – 59.0 (neutral)
  • UltraLong QQQQ (NYSEARCA:QLD) – 59.0 (neutral)
  • Ultra Long S&P 500 (NYSEARCA:SSO) – 63.9 (neutral)
  • Ultra Short S&P 500 (NYSEARCA:SDS) – 34.7 (neutral)
  • UltraShort 20+ Treasury (NYSEARCA:TBT) – 62.6 (neutral)
Source: ETF Trading Strategy: Patience Pays