With the blizzard in the northeast keeping many Wall Street Wizards and Masters Of The Universe stuck at home, the market action today was very quiet.  End of month window dressing also played a part.  The Dow Industrials added 4 points to close at 10,325.26.  The S&P 500 Index and Nasdaq Composite gained .14% and .18% respectively.  Surprisingly, there weren’t many Narrow Range 7 days today on the major indexes.

Silver and gold are moving higher again after bottoming three weeks ago.  SLV gained 2.41% and GLD added 1.01%.  Commodities are also doing well: UCD, the leveraged commodity ETF, gained 3.40% and is trading in a tight range with its 200-day SMA as support and its 50-day SMA as resistance.  UCO, the leveraged crude oil ETF, picked up 3.84% and has retraced 50% of the decline between the October high and the February low.  Please click on the symbols for details.

Speaking of oil, OIL has been trading within a range since June.  The weekly chart below shows the slightly rising trend channel.  Volume has dried up which is typical in a consolidation.  You can click on the chart to make it full-screen:

I’m finding many commodity charts that look like OIL, trading within a range on low(er) volume.  One of these days, a news story is going to trigger either or buying or selling across the board and break the market out of its trading band.  What that news is and when it will come out is something we will know in the fullness of time.

The market staged an impressive rally this afternoon but still closed in the red, after gapping down 155 points in the opening five minutes thanks to a worse-then-expected employment report.  The Dow Industrials closed down 53 points to 10,321.03.  The S&P 500 Index was helped by speculation that Apple may split 4:1; the S&P closing down just .23%.  The Nasdaq Composite index recovered almost all of it’s early losses to close down only .08% and the Nasdaq-100 Index managed to close .04% higher.

Despite the recovery, the ETF winners today were by and large the inverse funds.  SCO, the leveraged inverse oil ETF, gained 4.19%.  GLD pulled up .79% and for those who measure gaps based on open/close rather than high/low, the gap is still intact (see yesterday’s blog for a fuller explanation).  Keep an eye on XME, the S&P metals and mining ETF.  It made a bullish engulfing bar today on heavier volume.

An engulfing bar is the Japanese candlestick name for small black (or filled) body followed by and contained within a large white (or open) body.  The main body (the wide part) of the candlestick represents the range between the opening and closing prices. If the closing price is higher than the opening price, the main body is white. If the closing price is lower than the opening price, the main body is black.  The lines protruding from either end are called wicks or shadows.  Here is what it looks like:

When an engulfing bar appears after a downtrend it is considered a potential reversing signal.  When it occurs in an uptrend it doesn’t have as much forecasting value.

The choppiness in the market action can be explained in part because the major market indexes are trading between their 50- and 200-day SMAs.  Institutional traders like hedge funds prefer to trade in the direction of the primary trend and are not happy unless the trend generally is moving in one direction or the other.  That’s not to say there aren’t hedge funds that fade the trend – buying when others are selling and vice versa – but as any salmon will tell you, it’s easier to swim downstream than against the current.

Broad market indexes are chopping between their 38.2% and 61.8% Fibonacci retracement levels, using the 2010 high and low price as the end points.  You can clearly see that in the daily QQQQ chart, below.  Please click on the chart to make it full-screen:

Until a directional move begins anew, regardless of direction, trading or investing in this market will be frustrating.  There is no shame in staying on the sidelines in cash until that happens, although short-term oversold or overbought conditions can be traded using the techniques I’ve introduced in the blog.  Whether the market continues pulling back and breaks out to the downside, or starts a bull rally to new highs, is something we will know in the fullness of time.

I’m not the suspicious type but…today, a day where I lost my broadband service and couldn’t watch the market with my usual gee-gaws, the market makes back all but a few of the points it lost yesterday, which was a day where I had my broadband service.  Just because you’re not paranoid doesn’t mean they’re not watching you….

The Dow Industrials gained back 92 points today to close at 10,374.16, down only 9.22 from Friday’s close.  Fed Chairman Bernanke said the central bank will keep interest rates low to ensure the economic recovery, sparking the recovery.  The S&P 500 Index rose .97% and the Nasdaq Composite rallied 1.01%.

The SOX (Semiconductor) Index was a big winner today, up 1.92%.  USD, the leveraged semiconductor ETF, picked up 3.35% although it couldn’t close back above its 50-day SMA.  Financials also outperformed today and UYG, the leveraged financial ETF, rose 3.06%, back above its 50-day SMA.    The U.S. dollar and gold were both lower today but keep an eye on USO, the oil ETF, which gained 1.72%.  USO has been trading within a range between $35 and $42 since late October.  You can click on the symbols for details.

So the market is back to Square One, right?

Not quite.

Take a look at the volume today versus yesterday: Dow Industrials – down 6.7%.  SPY (S&P 500 SPDRS) – down 15%.  Nasdaq Composite – down 6.8%.  Heavier volume on down days than up days.  Seems like distribution, if you ask me.

All three had inside days today, meaning that today’s open was above yesterday’s close and today’s close was below yesterday’s open.  In Japanese candlestick terminology this is a harami. Its is a bearish pattern when preceded by an uptrend, which the market has been in since February 5.  The picture below shows what I mean:

Of concern from a technical analysis standpoint was the inability of the major exchanges to close back above their 50-day SMAs.  I’ve emphasized many times the TA axiom that a support line once broken frequently acts as resistance when tested.  The indexes broke below their 50-day MAs on January 21 – 22 and after trying to get back above the moving average earlier this week, rolled over yesterday.  Today’s rise back to the MA on lighter volume is a clear sign the three-week rally is still in trouble.

Gold and GLD also look to be in trouble.  The weekly chart below shows GLD closed the gap it opened two weeks.  You can click on the chart to make it full-screen:

Last week GLD gapped open higher from the previous week and closed above the gap, but the open and close were at virtually the same price, at 109.45 and 109.47, respectively.  That’s not a good thing.  In candlestick terminology this is called a doji.  It takes on increasing importance when it’s a doji star, which is a doji that gaps above or below a white or black candlestick.  Last week’s doji star gapped above a white candlestick.  It is a reversal signal confirmed by the next candlestick, and so far it certainly has been confirmed!

To get back to my discussion about closing the gap, some technicians believe what counts is whether the current bar’s low fell below the previous bar’s high, while other technicians follow the price bar’s closes and opens rather than the highs and lows.  This week’s low is below last week’s high so in once sense, the gap has been filled.  Other technicians would wait for a confirmation, i.e., this week’s close is below last week’s open.  No matter how you look at it, the action so far this week has been bearish.

I also see the forecast oscillator has been making a series of lower highs and lower lows, just like the weekly chart has been making.  As of today the oscillator (the solid line) is below zero, which is bearish, and is about to cross below the trigger line (the dashed line), which would be very bearish.

I have read numerous articles over the past week or so about gold topping out; not that it means the authors are correct but the chart…so far…is validating their assertion.  Whether or not they end up being correct is something will know in the fullness of time.

The market fell 101 points today to close at 10,282.41 on heavier volume.  The S&P 500 Index fell 1.21% and the Nasdaq Composite dropped 1.28%.  The Conference Board’s confidence index slumped to 46, below the lowest forecast in a Bloomberg News survey of economists, from 56.5 in January, its lowest level in 10 months.

Inverse market ETFs were stars today, as you would expect.  FAZ, the Financial Bear 3X Shares, gained 4.48%.  The dollar was up which negatively affected commodities and metals; ZSL the leveraged Silver ETF, picked up 4.08% while SMN, the leveraged base metals ETF, tacked on 4.92%.  Please click on the symbols for details.

EWG, the Msci Germany Index, broke down through it’s recent consolidation zone.  On February 19 it completed a Multiple Day Down (MDD) pattern and the breakdown came today.  The MDD pattern exits on a close below the 5-day SMA, which also came today.  The entry was on the close of 2/19 at 20.38 and today’s exit on the close of 19.96 resulted in a 2.1% gain before trading costs.  No guarantee it will work that well next time, of course.  For a full description of the MDD pattern, please use type “EWG” in the search box on the upper right of the blog and click on the 2/19 post.

TLT, the 20+ year Treasury bond ETF, bounced strongly off its neckline to close just below its 50-day SMA.  Various technical indicators such as stochastic and the forecast oscillator look good for a continuation of the move but with TLT below both  its 200-day and 50-day SMA, I’ll wait for a pullback on TBF, the short 20+ year Treasury bond ETF.

I need to make this a short blog tonight so let’s wait and watch to see what happens tomorrow.

The action today was quiet, with the Dow Industrials closing down 19 at 10,383.38. The S&P 500 Index fell .10% and the Nasdaq Composite dropped .08%.  I didn’t think it possible but volume today was quieter than Friday on all three indexes.  Helicopter Ben (Bernanke) will be testifying before Congress and everyone is waiting to hear what he has to day.

Energy stocks took a hit today and ERY, the 3X Energy Bear ETF, rose 4.15%.  Financial stocks picked up some lost ground and FAS, the 3X Financial Bull ETF, gained 3.04%.  And that brings me to today’s chart of TLT, the 20+ Year Treasury Bond ETF.

The weekly chart below shows a big ol’ Head & Shoulder Top pattern.  The left shoulder is marked as LS and the right shoulder as RS.  Please click on the chart to make it full-screen:

The H&S top pattern is typically found after a prolonged advance.  The neckline reflects major support.  Minor resistance appears at the tops of the shoulders and major resistance along the top of the head.  When the 50-day SMA crosses below the 200-day SMA , look for the breakout.  Although I’ve displayed a weekly chart, those shown on the chart are daily simple moving average lines.  The MA crossover on TLT came back in May 2009.

The forecasting rule with H&S patterns is to deduct the height of the formation (from the head to the neckline) from the breakout point, to arrive at a projected price level.  I don’t think that will work this time.  The distance between the head and neckline is around 34.50.  Subtract that from the breakout price (the neckline) and you get 123.15 – 88.55 = 34.60.  88.55 – 34.60 = 53.95.  TLT has never traded below 80.  There is a first time for everything but I don’t think this is it.

Note how the moving average/resistance lines held on a throwback test to the 50-day SMA in October and December and the 200-day SMA the past few weeks.  There is a lot of downside pressure on TLT right now and whether or not the neckline continues holding as support is something we will know in the fullness of time.

That’s how options expiration ended, with a whisper?  I’m reminded of the potboiler detective novels written in the 1950′s and 1960′s – “It was quiet in that part of town, too quiet for its own good….”

The market traded in a narrow range today although not quite as narrow as a few days ago.  The Dow Industrials added 9 points to close at 10,402.35.  The S&P 500 Index rose .22% and the Nasdaq Composite gained .10%.

Most ETFs were little changed today but FXP, the leveraged short Ftse/Xinhua China 25 Index ETF, gained 2.76%.  It made a Narrow Range (NR) 7 day today (perhaps foreshadowing expanded volatility next week?) and has risen to just below its 200-day SMA.  The past few days I’ve written about the RSI 90/94 short strategy using FXI, the Ftse/Xinhua China 25 Index.  Rather than going short you can buy FXP.

Volume on the indexes continues to lag.  The Dow’s volume was barely above average today and the S&P had it’s lightest trading since the week ending New Year’s Eve.  Today’s Nasdaq volume was better than yesterday but still below average.

It’s tough finding meaningful entries right now.  There’s an old expression, “Never short a dull market,” and this market is about as dull as dishwater.  I’m not seeing many long setups, either.  I did find a short worth examining, however, in EWG, the Msci Germany Index ETF.

Larry Connors and Cesar Alvarez in their book, High Probability ETF Trading, presented the Multiple Days Up (MDU) and Multiple Days Down (MDD) strategy for trading oversold and overbought ETFs.  Use the MDU rules when the ETF is below its 200-day SMA and the MDD rules when its above its 200-day SMA.  EWG is trading below its 200-day SMA.  The chart is shown below.  Please click it if you want to make it full-screen:

The short entry rules for the MDU are simple:

1) The ETF is trading below its 200-day SMA.

2) The ETF closes above its 5-day SMA on the entry day.

3) The ETF must rise 4 of the past 5 days.  This means closing prices were higher than the day before for 4 out of of the past 5 days.  If this happens you short sell the ETF on the close today.

4) Aggressive version – Short a second unit (scale-in) if prices close higher than your initial entry anytime you’re in the position.

5) Exit on the close when the ETF closes below its 5-day SMA.

The most recent five days are numbered, with Day 3 being the one day there wasn’t a higher close.

Using 20 ETFs from inception through 12/31/08, the basic strategy generated 629 short trades with an average P/L of .80%, an average holding period of 3.4 days, and 71.1% of the trades were winners.  The aggressive version of the strategy had an average P/L of 1.25% and 77.1% of the trades were winners.  Past performance, of course, is no guarantee of future results.

It’s hard to say whether the low volume will continue next week.  Several ETFs this week had NR 7 days yet they failed to see an increase in volatility.  Whether the same is true next week is something we will know in the fullness of time.

The Dow Industrials jumped 83 points today to close at 10,392.90 as the market reacted to two different news stories: stronger manufacturing reports and the Fed raising the discount rate from .50% to .75% effective tomorrow.  Stock futures plummeted after-hours on the rate hike news.  The S&P 500 Index prior to the after-hours dump rose .66% and the Nasdaq Composite gained .69%.

But….

With only a few exceptions the overwhelming majority of ETFs (and I’m including the leveraged ETFs) that were up today gained less than 2%.  I’ve been pointing out for several days now that the market keeps climbing while the volume keeps falling.  Today’s volume on the Dow was the lowest it’s been in the last 8 trading days.  The Nasdaq volume was once again below average.  Yet both indexes closed just above their respective 50-day SMAs.  Points is points – the Dow is up 550 points since the February 5 low – and it doesn’t matter whether they come on light, heavy, or average volume.  So are we back in the bull market?

I don’t think we will have to wait for the fullness of time on this one…I think we’ll find out very soon.

The Gatekeeper, developed by my AAPTA colleague Dave Landry,  is a reversal pattern that looks to identify when a market, stock, or ETF has completed a “last gasp” higher, a.k.a., a top.  The Gatekeeper incorporates some of the elements of Fibonacci analysis that I’ve described in previous blog entries.  While the Gatekeeper can be used for buys/bottoming action, I’ve found it more effective for short sales/topping action.  Please keep in mind that you don’t have to actually sell short when using the Gatekeeper; you can apply the technique to an index and buy an inverse market ETF when the signal is triggered.

Here are the short sale rules for the Gatekeeper:

1) The stock/market/ETF must make at least a new two-month high.

2) This should be followed by a sharp sell-off.

3) After the sell-off, the stock/market/ETF should retrace to at least 61.8% and ideally 78.6% of its sell-off.  In general, this should occur within 10 – 11 days.

4. Look to place a short entry at the low of the bar in Rule #3.

5. If filled, place a protective stop above the high of Rule #4.

6. Use your choice of profit exit.

Please look at the daily chart of QQQQ, below.  Click on it to make it full-screen:

Last month QQQQ made a multi-month high and a few days later started a 9.7% pullback.  Since the February 5 low it has retraced 61.8% of that decline.

As of today the Gatekeeper has set up.  The short will be entered a tick or two below today’s low unless before that occurs, QQQQ climbs to the 78.6% level, around 45.70 (not shown).  Should that happen, a tick or two below the low of that bar is where the short would be entered.  Rather than short the Qubes you can buy PSQ, the inverse Nasdaq-100 ETF.

With rates starting to rise it will be very interesting to see how this is digested by Mr. Market.  Stay tuned!

The market continued moving higher as better-than-estimated earnings and economic data signaled the global recovery is gaining momentum, despite budget woes in Greece and China tamping down their economy.  Deere & Co. and Whole Foods beat earnings estimates and raised forecasts for next year.  The Dow Industrials added 40 points to close at 10,309.24.  The S&P 500 Index gained .42% and the Nasdaq Composite was the leader of the Big Three today, tacking on .55%.

Despite the advance almost all of the ETFs that turned in 2% or better gains today were those very thinly traded.  For example, BHH, the B2B Internet HLDRS, was up 2.27% on a whopping 22,000 shares today.  PBTQ, a global biotech ETF, gained 3.24% on…(wait for it)….1,000 shares.  Even 3X leveraged ETFs like MWJ, the Midcap Bull, were up only 1.80% – but at least it did it on solid volume.  Please click on the symbols for details.

The past few days I’ve been pointing out how volume has been declining as the market has been rising.  The price rise on the Dow Industrials both yesterday and today came on lower than average volume.  Same thing for the Nasdaq Composite.  Yesterday I wrote about making trading decisions based on what you know, not on what you don’t know.  I’d like to continue that theme today.

Markets that rise for multiple days are ripe for the pickin’, especially when they rise on steadily decreasing volume.  Case in point is FXI, the Ftse/Xinhua China 25 Index ETF.  It has moved higher on steadily decreasing volume since February 9.  When I see a market making multiple day lows or highs on decreasing volume, I look for setups where I can utilize the RSI 10/6 and the RSI 90/94 strategies.

In Larry Connors and Cesar Alvarez’s book, “High Probability ETF Trading,” they describe in detail these strategies.  It looks for extreme pullbacks on an ETF, buys or shorts them, then sells or covers on a snapback.

The trading rules are as follows.  For buys:

1. Today the ETF is above its 200-day SMA.

2. Buy when the 2-period RSI of the ETF looks to close under 10.  This tells us the ETF  pulled back in an uptrend.

3. Buy a second unit if the RSI looks to close under 6.

4. Exit all positions on the close when the ETF closes above its 5-day SMA.

For shorts:

1. Today the ETF is below its 200-day SMA.

2. Short when the 2-period RSI of the ETF looks to close above 90.  This tells us the ETF  moved higher in an uptrend.

3. Short a second unit if the RSI looks to close above 94.

4. Exit all positions on the close when the ETF below its 5-day SMA.

While inverse ETFs can be bought (rather than shorting the regular ETF) when their market is trending lower, I’ll show you an example that shorts FXI.  Please review the chart below, which you can make full-screen by clicking on it:

The chart is in thirds: price with moving averages (upper-third); RSI with an oversold limit of 10 and an overbought limit of 90 (middle-third); and volume showing each day’s volume and the average daily volume (lower-third).

You can see a successful short trade that was executed at the beginning of the month.  The “-100 InitShort” means the strategy placed an initial short of 100 shares on that date.  Although not shown on the chart, “2ndShort” means a second 100 shares was shorted.  “C<MA5″ is the close below the 50-day SMA.

On February 2, FXI was trading below its 200-day SMA while its 2-day RSI closed just above 90, at 90.06.  A short would have been entered at or near the close, at 39.84.  Two days later FXI closed below its 50-day SMA at 38.02.  If you covered there you made a 4.56% profit before trading costs in just two days.  Another short trade was entered into last week on February 11.  Note how FXI has been moving higher on steadily decreasing volume for a week.  Look at the same volume pattern going into the February 2 short.

The February 2 trade is a bit misleading because with the RSI-2 closing only fractionally above 90, odds are you would not have placed the trade since you had no way of knowing with certainty the RSI would close above 90.  I went and backtested this strategy using 10 years of data for FXI.  There were 22 trades, of which 18 were profitable; 3 were not; and the 1 open trade.  The wining percentage was 85.71%.  The average gain was 2.33%.

Of course, past performance is no guarantee of future results.  When Connors and Alvarez tested the strategy (both long and short) on a basket of 20 ETFs from their inception through 12/31/08, there were 1,075 long trades with a percentage winners of 81% and an average gain of .93%.  There were 566 short trades with a percentage winners of 76% and an average gain of 1.56%.

The market climbing on decreasing volume is trying to tell us something.  Are you listening?  If not, it will be sure to tell you in the fullness of time.

So is that it?  Is the market’s pullback over?  Are we going to start making new highs again?

I dunno.

Technical analysis is a tool for putting the odds in your favor.  Whether you use chart pattern interpretation, apply technical indicators to a chart, and/or utilize Elliott Wave analysis, unless your crystal ball is working better than mine, all you can do is interpret what you see and place trades in the direction that favors the odds.

For example, today the Dow gained almost 170 points to close at 10,268.81.  The S&P 500 index added 1.80% and the Nasdaq Composite tacked on 1.40%.  The indexes have been rising since February 5, which from the low was a near-900 point pullback, or 8.3%.  So does this mean it’s safe to think the worst is over and we’re back in the bull market?

I dunno.

Technical analysis tells me that more often than not, price movement needs to be confirmed with volume or the odds favor a retracement.  A lack of confirmation is just as important to a technician as is confirmation.  Last week’s rise came on lighter than average volume.  Some said this was due to the blizzards that hit the east coast, keeping many institutional players out of their offices.  Others said the volume was down because of the upcoming three-day weekend.  Are they correct?

I dunno.

What I do know is what I see on this chart of the Dow Industrials, below.  You can click on it to make it full-screen:

1) I know the Dow is above its 200-day SMA but below its 50-day SMA.  The 50-day SMA has turned lower.

2) I know that today, a day with only light snow in NY, volume on the Dow Industrials and Nasdaq Composite was below average.  Accumulation days usually come on above-average volume, not below-average volume.

3) I know that on Friday, a day the Dow closed lower, there was above-average volume.

4) I know that today’s high was 3 points short of a 50% retracement of the decline since the January highs.  Last time the Dow reached its 50% level on February 2 and 3, it failed to keep moving higher and subsequently made a lower low.

So does this mean the Dow has topped out and won’t keep rising?  I dunno.

What I do know is that the odds favor a resistance line holding when it successfully held on a previous attempt to break through (the 50% retracement level).  I can use that knowledge to position myself using ETF strategies that capitalize on this.

For example, I know that had you bought the SSO (the leveraged S&P 500 ETF) and DDM (the leveraged Dow 30 ETF) on February 4 as part of a modified Double 7′s swing trade (see the 2/4 blog entry for details), you wanted to sell them when the SPY and Dow Industrials close at a 7-day high.  Why?  Because about 80% the time, a seven-day closing high is when the market has recovered from the sell-off that led to the entry signal.  That’s putting the odds in your favor.

Today was a seven-day closing high for the Dow and the S&P 500 Index.  Had you gone long SSO and DDM near the close on February 4 and sold today near the close, the gain on both was about 5%.  Please keep in mind that past performance does not guarantee future results.  The fact that the seven-day closing high came right under the 50% retracement level may or may not be a coincidence.

I use technical analysis to put the odds in my favor.  The market was oversold on February 4 but now has retraced almost 50% of its 8.3% decline since the January high.  This retracement higher has come most days on below average volume.  Last time the Dow retraced this high it failed to go much higher and subsequently made a new low.  The S&P 500 Index has an almost identical pattern.

That’s what I know so I traded it that way.  Will the markets stall here or will a rising dollar/rising commodity prices send it higher still?

I dunno.

But we will know in the fullness of time.

We head out to a three-day weekend with a mixed bag at the close.  The Dow Industrials closed down 45 points at 10,099.14.  Quite a comeback considering that at one point this morning it was down 160 points!  The S&P 500 Index also closed in the red, down .27%, but the Nasdaq Composite turned out a positive showing and gained .28%.

The U.S. Dollar made a 7-month intraday high.  China boosting bank reserve requirements and data showing the Euproean economic recover has stalled took its toll on commodities and the Euro.   Many of the inverse leveraged commodity ETNs like DEE and DTO gained 2% – 3% today.  EUO, the leveraged short Euro ETF, gained 1.28%.  FXP, the leveraged short China ETF, jumped up 3.52%.  Please click on the symbols for details.

Even though many of the index ETFs had a large daily range today, not all indexes did.  Keep an eye on XHB, the SPDR S&P Homebuilders Index.  It’s 14-day ADX closed below 15 today and made a Narrow Range 7 bar.  Regular readers of the blog know narrow range days typically are followed by an outsized move within a few days afterwards; the low ADX adds more fuel to the fire. XHB has traded sideways since mid-October.

Although buying breakouts still has its place, the past few years I’ve had more success buying pullbacks.  Pullbacks doesn’t necessarily mean price is the pullback I’m buying, however.  In past blog entries I’ve discussed several RSI pullback strategies developed by Larry Connors, Cesar Alvarez, Dave Landry and Linda Raschke.  There’s a RSI pullback strategy I don’t use too often because it doesn’t fire off too many signals but when it does, the percentage of winning trades is high.

The strategy is called “R3.”  Developed by Larry and Cesar and described in their book “High Probability ETF Trading,” and the trading rules are simple:

1) The ETF is above its 200-day SMA.

2) The 2-period RSI drops three days in a row and the first day’s drop is from below 60.

3) The 2-period RSI closes under 10 today.  Buy on the close.

4) Buy a second unit if prices close lower than the initial entry price any time you’re in the position.

5) Exit when the 2-period RSI closes above 70.

In a backtest with 20 non-leveraged ETFs from their inception to 12/31/08, there were a total of 700 trades with an average %P/L of 1.24%.  The percentage of winners was 80.7% and the average trade length was 5 days.

I randomly picked a few ETFs and backtested them since their inception or 10 years, whichever was shorter, and ending today.  The results are as follows:

GLD: 35 trades of which 28 were profitable (80%).  Average gain was 2.54%.  Trade days held was 8 days (rounded).

XHB: 16 trades of which 12 were profitable (75%).  Average gain was .28%.  Trade days held was 7 days (rounded).

EEM: 42 trades of which 33 were profitable (78.57%).  Average gain was 2.57.  Trade days held was 7 days (rounded).

DIA: 61 trades of which 45 were profitable (73.77%).  Average gain was 2.84%.  Trade days held was 8 days (rounded).

Below is screen shot of the strategy applied to DIA.  The lower half of the screen is the RSI with upper and lower levels of 70 and 60.  Days with lower consecutive RSI’s are numbered 1 through 3.  The price bars in the upper half of the screen show the entry Buy of 100 shares and a second Buy for a total of 200 shares.  RSI > 70 was the exit day.  You can click on the chart to make it full-screen:

Past performance does not guarantee future results.

Consecutive days down should be watched for buying opportunities.  Next week is options expiration week and volatility could be high, providing additional entry opportunities using R3.