Unless you’ve been living under a rock this week, you’ve noticed the broad-based forceful selling in the markets, and that (for example) the Dow and Nasdaq highs we heard so much about last week now seem like a distant memory.

It’s tough to ride out situations like this, but remember that periods of real uncertainty are what keep volatility premium in options prices, which in turn allow us to find profitable trades.

And there’s some good news from Dr. Brett at TraderFeed (another site we like):

I notice that we made over 1500 fresh 65-day lows across the NYSE, NASDAQ, and ASE on Tuesday. Since 2004 (N = 858 trading days), that’s been a pretty rare occurrence. Interestingly, following the 10 occasions in which we’ve exceeded 1500 new 65-day lows, the S&P 500 Index (SPY) has been up five days later all 10 times, by an average of 1.00%. By contrast, the average five-day gain for the remainder of the sample has been .17% (473 up, 346 down).

In other words, historically speaking we have every reason to look for a decent bounce in the very near future. He continues: “When we look 30 days following the days in which we’ve had more than 1500 new 65 day lows, SPY has been up by an average of 4.28% (9 up, 1 down).” So although it may seem like there’s no firm bottom in sight, we have every reason to hold on.

Members will receive position updates as necessary in the coming days. As always, we welcome your feedback!