After a month long correction, the S&P has managed to bounce slightly higher, but that hasn’t stopped some of the ETFs I follow from pushing into a short-term overbought state. And not only are a few of these ETFs in a short-term overbought state, but the major market indices are back at areas of very strong overhead resistance. Couple a short-term overbought state with strong overhead resistance and we could see some short-term weakness going forward.
Again, many of the ETFs I follow for the Options Advantage service have pushed into a short-term “very overbought” so while the rally in the ETFs mentioned below looks strong, I do expect a retreat or at minimum a pause over the next week or so.
Some of the most short-term overbought ETFs at the moment are:
- Proshares Ultrashort 20-year Treasuries (TBT) 97.8 (very overbought)
- SPDR Consumer Dis (XLY) 92.6 (overbought)
- SPDR Homebuilders (XHB) 91.2 (overbought)
- SPDR Consumer Staples (XLP) 92.7 (overbought)
- SPDR Financials (XLF) 90.7 (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 11 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-probably 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 [email protected].