To trade ETFs successfully it is best done out of a cash account which has a big sign out front which reads "hold on to what is working, let go of what is not."
This implies that this cash account is kept uninvested and put to work only when a trend for either bull or bear ETFs is clearly enough established by positive configurations of their 10 day yellow, 20 day red and 50 day green Moving Average lines, while the bias of the market to the up or down side is well laid out by the TROIKA. With this method of gauging the market, you will properly not catch the very top and bottom of a trend, but you can cruise nicely right down the middle.
Such a cash account and trading method also leans toward pyramiding by following up gains, and retreating before losses. This procedure requires experience, judgment and a bit of home work. Participants usually use the end of a trading session to gauge the likely trend for the following day, and the top performing ETFs that will fit this trend, and wait till about mid-day before entering a trade. By that time the market has most likely found its footing, and the ETFs have found their trends.Click to enlarge
Meanwhile, back to the market, extremely low volume levels and top heavy overbought conditions gave the market a chance to take a breather and pull back for some overdue consolidation. But things out there are getting better. The global economies are improving, the worst appears to be over for the housing sector and U.S.corporations are in better shape than they've ever been.
This is why tons of cash are sitting on the sidelines earning next to nothing and therefore eager to get back into the market again. All of this is forming a favorable back drop for a continued bull market ahead. But obviously, there are still a lot of risks out there and it is going to be a bumpy ride to the upside. But check these charts... Click to enlarge...and see why this rally has only begun to find traction. For as long as the green, red and yellow MA lines of this Troika remain in their bullish configuration, this bull market and its rally will stay intact. Click to enlarge When the price of Brent crude oil soared to the highest level since mid 2008, I mentioned in my last article that anyone who rides a spike like this is holding a bear by the ears. Well, that bear took a bite out of this spike and who ever held it by the ears. So now the price of oil has a chance to consolidate the excess of this price spike. But the bias for oil remains to the upside for as long as its green, red and yellow MA lines remain in their current bullish configuration.
Sure, plenty of oil is still out there, but it is getting ever more expensive to get at it, while the demand supply edge is wearing pretty thin.
The selloff in gold was quite interesting in that it sold off in a matter of minutes, and just shows what happens when trading volume is extremely low, and the activity of robo traders with their hair-trigger trading systems extremely high. Still, for as long as the green, red and yellow MA lines for gold continue their bullish configuration, the yellow metal remains in play with a bias to the upside.
Not only are the first minor clouds of inflation starting to form at the horizon, but there are still plenty of unexpected troubles showing up in the Middle East and the Eurozone to keep the prize of gold geared to the upside.
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.