Markets showed some strength today, although not nearly as much as some were expecting. The Dow hit an intraday high of 12,326 (up 100+ points) but each intraday rally was consistently met with selling pressure. The conventional wisdom is that this was largely end-of-the-quarter “window dressing” by the institutions. Kind of an ugly window, no matter which curtains you put up: the major indexes are still all off 9% or more YTD.
We closed one of our April iron condors for a nice 11% gain, and we still have two other trades open for April, both of which are in excellent shape. This uncertain and oscillating market environment, while unpleasant for the buy-and-hold crowd, is ideal for option sellers.
Reversal Readings
We’re adding a new feature to our periodic market commentary posts, called “Reversal Readings”. A lot of readers ask for updates on the relative strength of various sectors, so in the future we’ll include notes on ETFs for the major indexes and sectors that are showing strong short term overbought or oversold conditions. This is just one indicator among many, but our goal with this feature is to give you a tool for looking at short-term trading opportunities based on mean-reversion tendencies.
At the close today, we’ve flagged the following names:
XLV - Healthcare - 9.3
XLB - Materials - 10
GLD - Gold - 3.65
These are the relative strength index (RSI) readings for the equities listed. Typically, a 2-period RSI reading above 95 or below 5 indicates a high probability of a reversal in the following trading session or sessions. We list any readings above 90 or below 10 for your information. More to come on this feature in future posts.