High Probability ETF Trading: 7 ETFs You Need to Know for Tuesday (QQQQ, ACWI, EEM, UYM, IYM, SPY, FAZ)

The ETF market overall is exceptionally overbought going into trading on Tuesday. This is true for both U.S. equity ETFs as well as international exchange-traded funds, which include some of the most overbought ETFs in our database.

As Larry Connors noted in this morning’s Morning Market Intelligence Report for Larry Connors’ Daily Battle Plan (click here to learn more about Larry Connors’ Daily Battle Plan), much of the current bullishness can be attributed to fund managers trying to avoid underperforming the averages. As long as markets remain overbought, a pullback remains likely sooner or later.

Here are 7 ETFs You Need to Know for Tuesday.

A two-day pullback in the ^QQQQ^ (below) helped lure buyers into the market for the Nasdaq 100-related ETF.

QQQQ chart

Both of the down days leading into Monday’s rally in the QQQQ were in oversold territory above the 200-day moving average. The QQQQ was one of the few major equity index ETFs to actually trade in oversold territory as 2010 drew to a close.

Two regional country funds are among the most overbought heading into trading on Tuesday: the ^ACWI^ and the ^EEM^ (below).

EEM chart

Shares of EEM have closed higher for five days in a row heading into trading on Tuesday.

As far as sectors are concerned, the overbought status of the ^UYM^ and the ^IYM^ (below) suggest strongly that raw materials remains among the more overbought sectors in the market, short-term.


IYM last closed in oversold territory above the 200-day moving average three weeks ago in mid-December. The exchange-traded fund has closed higher for five consecutive trading days.

Back in overbought territory above the 200-day moving average as of Monday’s close is the ^SPY^. The SPY last closed in oversold territory in mid-December.

Strength in financial stocks sent inverse leveraged ETFs like the ^FAZ^ to new, oversold extremes.

With 7 professional, quantified trading strategies for trading both bull and bear markets, High Probability ETF Trading by Larry Connors and Cesar Alvarez was voted one of the top 10 trading books of 2009 by SFO Magazine. Click here to find out why.

David Penn is Editor in Chief of TradingMarkets.com