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The Top Five Overbought ETFs

I guess Mr. Market liked the news out of Europe today.

As I am writing this all of the major market indices are reaping gains around 2%.

As a result, many of the ETFs I follow for the Options Advantage service have pushed into a short-term “very overbought” state so while this rally looks strong, I do expect at least a pause over the next week or so.

Some of the most short-term overbought ETFs at the moment are:

  • SPDR S&P Retail ETF (XRT)                            99.2 (very overbought)
  • iShares DJ U.S. Real Estate (IYR)                                95.4 (very overbought)
  • SPDR Health Care (XLV)                                 98.5 (very overbought)
  • SPDR Financial Sector (XLF)                          98.5 (very overbought)
  • iShares Russell 2000 (IWM)                          97.3 (very overbought)

The aforementioned ETFs are just a few of what is now a plethora of overbought ETFs in the market. In fact, out of the 40 ETFs that I follow for the Options Advantage service 32 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 or through buying puts. I prefer to use the former strategy, but will occasionally use the latter strategy for a shorter-term scalp trade.

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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