SPY Becomes More Oversold

SPDR S&P 500 (NYSE: SPY) closed down for the third day in a row yesterday and ended trading with a PowerRatings of 9.


SPY is the only major stock market index ETF that is oversold. It is possible the current market selloff will continue until it is confirmed by other indexes. It is also possible that with earnings season kicking off this week, the market could turn higher if earnings generally beat expectations.


A potential win-win strategy for markets like this is explained in the Connors Research Guidebook ETF Scale-In Strategy, If prices go straight up, the advantage of scale-in trading is that you have a profitable position. If prices go down, scale-in trading provides the opportunity to add to your position at even better prices. And you can continue to buy as prices go lower until you get your full position.

ProShares Ultra S&P 500 (NYSE: SSO) is also oversold with a PowerRatings of 9. PowerRatings are based on the relative strength or weakness of particular stocks or ETFs. The higher the rating, the greater the one week historical gain has been for stocks and ETFs with that rating. For best results, enter trades on stocks with a PowerRatings of 8 or higher with a limit order 3-7% below the previous day’s closing price. Higher % limit entries have historically shown a greater percentage of winning trades but higher % limit orders also reduce the chance of trade execution.

In the past, buying stocks with a rating of 9 on a 3% pullback the next day and selling five days later has been profitable 75% of the time. The average winner has gained 4.3%. Other entries and exits also show high winning percentages and large average gains.

Scale-in trading could also be used with SSO.

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All data is as of the end of day on 1/6/2014.