Short-Term, High-Probability Mean-Reversion: Several ETFs Hit Short-Term Extremes

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 |  Includes: DIA, EEM, EFA, EWY, EWZ, FXI, GDX, GLD, IBB, IWM, IYR, OIH, QLD, QQQ, RTH, SDS, SMH, SPY, SSO, TBT, TNA, TZA, USO, VXX, XLB, XLE, XLF, XLI, XLU, XLV, XLY
by: Andrew Crowder

Several of the ETFs I follow in the High-Probability, Mean Reversion strategy have hit a short-term “very overbought” extreme. Typically, when this type of event occurs a short-term reprieve (1-3 days) is right around the corner.

Unemployment numbers are out before the bell today so I expect to see a pop at the open. If the market opens higher today I expect to make a trade in the strategy, so subscribers stay tuned.

I currently have a trade on, so of course, a move lower at the open would not upset me either. I expect today will be a very interesting day.

Short-Term High-Probability, Mean-Reversion Indicator – as of close 3/31/11

Disclosure: I am short SPY.