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.
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 [email protected].