Seeking Alpha
Research analyst
Profile| Send Message|
( followers)  

September is known for being the worst month of the year for Wall Street, and this time it is no exception as investors are bracing for rocky sessions ahead.

There is a full plate of Syria-centered geopolitical tension, with the U.S. president trying to gather support to retaliate for Syria's poison gas incident, and the Russian president promising to come to Syria's aid should such an attack occur.

There is the upcoming U.S. Fed meeting which could trigger a tapering of the QE easy money programs that kept the U.S. economy alive for over four years, and there are the debt-ceiling woes along with overall concerns about the global economic health.

All of this is giving doomsayers a field-day out there.

Predictions by some high-profile strategists are calling for a crash, not only on Wall Street but in global markets as well. At the same time they can see the doomsday metal gold spiking up to ten Ks, while the U.S. economy is double-dipping into a deep recession, brought on by the Fed's exit from its easy-money QE programs.

Yet, a U.S. manufacturing index surprised economists by unexpectedly climbing in August to its highest level in more than two years, while another positive report showed construction spending increasing to the highest level in four years. Other economic data show that the U.S. is leading a global manufacturing recovery that stretches from China to Europe as their economies improve. When all is said and done, this is what really matters and will in the end carry the day.

Still, September saw the first week since last July that the Moving-Average configurations of the major indexes are beginning to turn bearish, in that the 50 day moving has started to slip above the 20 day, or to put it another way, green MA line above the red. This has some market watchers concerned that a bear market is just around the corner.

Not so!

Check this X vs. X chart which is an inverse indicator of the market. As long as this index fluctuates sideways along the lower end of its scale, the internals of the market remain bullish.

Not only that, but the MACD momentum index and RSI strength indicator are also way down in their respective negative territories, which is an exceedingly bullish sign for the market.

Also note that because this index is an inverse indicator, the bearish MA lines configuration (green line above the red) signals bullish market conditions ahead.

Confusing? Yes, but it works.

(click to enlarge)

Check the SPX, SPXL and SPXS Troika charts and note that their MA lines configurations have just turned negative for the market. Green line above the red for the bull and green line below the red for the bear.

Until these lines reverse and turn bullish again, it is best to stay in cash at the sidelines and watch the market unfold as it reacts to the Syria question and the Fed's tapering intentions. (click to enlarge)(click to enlarge)(click to enlarge)

Throughout all that turmoil out there, the NASDAQ index (NDX) remains remarkably bullish. Note that while this index is consolidating, its MA lines configuration remains solidly bullish (green line below the red).

Also note that its MACD momentum index and RSI strength indicator remain in their respective bullish territories, which bodes well for the market as a whole.

(click to enlarge)

This Treasury note index (TNX) is consolidating at a relatively high level while being well supported by a strongly bullish MA lines configuration (green line below the red). Also supportive are the MACD momentum index and RSI strength indicator, both of which are solid in their respective positive territories. This is a bullish signal for the economy because this index reflects rising economic optimism.

(click to enlarge)

By contrast, this market-forecasting junk bond canary (NYSEARCA:JNK) continues to send out bearish signals by keeping the green MA line above the red line. Unless this configuration turns bullish again (green line below the red) the market will have a tough time keeping a sustained rally in place. It is these conflicting signals that cause all this volatility in the market.

(click to enlarge)

Check these (CRB) commodity supply and the (BDI) commodity demand indexes (both are joint at the hip) and note that they are showing strongly bullish MA lines configurations. This bodes well for the commodity market generally, and falls in line with the rising economic optimism out there.

But the BDI index shows a bit too much exuberance, and needs to pull back to reality a bit.

(click to enlarge)

(click to enlarge)

After a much needed pull-back (gold) has again found its footing and could be in a consolidation mode. But because of its MA lines bullish configuration (green line below the red) gold remains a bull at the core.

(click to enlarge)

Although the U.S. dollar had itself a bit of a rally, but with the exceedingly bearish MA lines configuration (green line above the red) the greenback remains very much a bear. That is one of the reasons gold is finding some traction again.

(click to enlarge)

Although it is still best to stay at the sidelines until the situation in the markets becomes a bit clearer, here are some favoured ETFs to keep on tap in case the market develops some momentum, one way or the other.

Leveraged Bull ETFs for traders:

Mid Caps 3x (NYSEARCA:MIDU), NASDAQ 100 3x (NASDAQ:TQQQ) S&P 500, 3x (NYSEARCA:UPRO), Semis 3x (NYSEARCA:SOXL)

Financials 3x (NYSEARCA:UYG), Technology 3x (NYSEARCA:TECL), Energy 3x (NYSEARCA:ERX), DOW 30, 3x (NYSEARCA:UDOW),

Basic Materials 3x (NYSEARCA:UYM), Biotech 2x (NASDAQ:BIB), Financials 3x (NYSEARCA:FAS), Gold 2x (NYSEARCA:UGL),

Small Caps 3x (NYSEARCA:TNA), Russell 2000 3x (NYSEARCA:URTY), Healthcare 3x (NYSEARCA:CURE), Technology 2x (NYSEARCA:ROM)

Russell 2000, 2x (NYSEARCA:UWM), S&P 500, (NYSEARCA:SPXL), NASDAQ 100, 2x (Pending:QLS), Silver 2x (AGQ0).

Non-Leveraged Long ETFs for investors:

Solar (NYSEARCA:TAN), Golden Dragon (NYSEARCA:PGJ), Biotech (NYSEARCA:PBE), Internet (NASDAQ:PNQI), Biotech (NYSEARCA:FBT),

Internet (NYSEARCA:FDN), Health Care (NASDAQ:PSCH), Pharma (NYSEARCA:PJP), Europe (NYSEARCA:DFE), S&P 500 (NYSEARCA:RPV)

Banks (NYSEARCA:KBE), Health Provider (NYSEARCA:IHF), Oil Fund (NYSEARCA:USO), Health Care (YH), India (NASDAQ:INDY),

Small Caps (NYSEARCA:DWAS), Discretionaries (VLR), Silver (NYSEARCA:SLV), Gold (NYSEARCA:DGL).

Leveraged Bear ETFs:

DB Gold 2x (NYSEARCA:DZZ), Semis 3x (NYSEARCA:SOXS), Emerging Markets 3x (NYSEARCA:EDZ), Energy 3x (NYSEARCA:ERY).

Financials 3x (NYSEARCA:FAZ), Mid Caps 3x (NYSEARCA:MIDZ), Small Caps 3x (NYSEARCA:TZA), Technology 3x (OTC:TECZ),

Nat Gas 3x (GASK), S&P 500, 3x (NYSEARCA:SPXS), Russell 3x (NYSEARCA:SRTY), Oil 2x (NYSEARCA:SCO),

DOW 30, 3x (NYSEARCA:DXD), Health Care 2x (NYSEARCA:RXD), Gold 2x (NYSEARCA:GLL), NASDAQ 100 2x (NYSEARCA:QID).

Non-Leveraged Short ETFs:

Gold (NYSEARCA:DGZ), DOW 30 (NYSEARCA:DOG), Mid Caps (NYSEARCA:MYY), Russell 2000 (NYSEARCA:RWM), Small Caps (NYSEARCA:SJB),

Equity Bear (NYSEARCA:HDGE), Emerging Markets (NYSEARCA:EUM), Oil (NYSEARCA:DNO), NASDAQ 100 (NYSEARCA:PSQ).

Source: September Blues