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The Top Five Overbought ETFs (QQQ, XLI, XLB, EWG, IWM)

Andy Crowder

After a month-long correction, the S&P 500 has managed to bounce significantly higher over a relatively short timeframe.

As the old Wall Street adage goes, “never sell a dull market." And that is exactly what we witnessed last week in the market — low volume and no sellers.

The lack of sellers allowed what little buyers there were out there to push the market higher and back into a short-term overbought state.

Typically when we see this type of overbought reading, mean-regression kicks in and a short-term reprieve occurs over the next 1-5 days.

Out of the 40+ high-liquid ETFs I follow in my Options Advantage service, the following are the most overbought at the moment:

  • Proshares Ultrashort 20-year Treasuries (QQQ)            98.9 (very overbought)
  • AMEX Industrial (XLI)                                                             98.7 (very overbought)
  • AMEX SPDR Materials (XLB)                                               98.6 (very overbought)
  • iShares Germany (EWG)                                                      98.5 (very overbought)
  • iShares Russell 2000 (IWM)                                                98.7 (very overbought)

The aforementioned ETFs are just a few of the highly liquid, overbought ETFs I follow in the market. In fact, out of the 40+ ETFs that I follow for the Options Advantage service, nine are in an extreme overbought state.

Typically, when this type of overbought set-up occurs I will fade the market by selling bear call spreads with a high probability of success.

If you would like to learn more about the strategies I use in the Options Advantage service please do not hesitate to email me at

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