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George Simone
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I'm a long-time Market Participant who has criss-crossed the Market for more years than I care to remember, and a few years ago I got hooked on studying and trading ETFs, especially the leveraged kind. Charts, good charts are an absolute necessity in this field, so the Linchpin of my ETF... More
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  • Down Week For The Market - Excellent!

    This was the week when the market registered two triple-digit tumbles in a row between last Wednesday and Thursday. But by the following Friday's close, the market had again reversed course with the DOW closing double digits to the upside. This tango has been going on for months, and just shows the resiliency of this market. Although volume and upside-momentum have been lousy, the market was able to steadily ratchet higher and now has become top-heavy and in danger of keeling over.

    Not only that, the two bull components of this Troika [RSP] and [SPXL] were blowing bubbles at the top of the RSI channel, which is always a signal to get out of the game for awhile and just watch how the ball bounces. Although the Moving Average lines of these components had formed bullish configurations [green lines below the red] the MACD momentum bars had slipped into their respective bearish territories below the demarcation line and that can put the kibosh on any rally. But by May these bars were back in bullish territory above this line, and that gave the green light for the rally to continue. But with bubbles appearing on top of the RSI channels of the RSP and SPXL, it's a good thing that the market had a down week so it can search for renewed traction at a lower level.

    The good thing about this Troika is that the bear component [SPXS] remains stuck at the bottom of a deep pit without a chance of climbing out of it any time soon. This means that while temporary pullbacks are in the cards, a full-blown correction is not.

    Meanwhile, there are plenty of headwinds out there for the market to get through. The violence in Iraq is sending oil prices thorough the roof threatening the still fragile recovery of the economy. The surge of the Suni-Islamists could divide Iraq and establish a terrorist state, and that is giving Washington a headache. Not only that, but the surprise defeat of a key-house Republican is causing U.S. political uncertainty while lousy economic growth forecasts by the world's central banks all combine to make market participants a bit jumpy.

    Still, according to the projections of these Troika charts the market is forming a base for the upside, and not a ceiling from which to nosedive the other way.

    (click to enlarge)

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    The consumer discretionary sector [XLY] is a leading indicator of the market and that it had rallied strongly is a bullish omen for the market in the weeks ahead. But it had shot up too fast and now has to take a breather and consolidate. For as long as its MA lines configuration remains bullish with the green line below the red, so will the market.

    (click to enlarge)

    This market forecasting junk-bond canary [JNK] just doesn't want to stop pointing to bullish markets ahead. That its MACD momentum bars are finally beginning to climb on top of the demarcation line suggests that momentum is finally beginning to support the market's rallies.

    But there's where the danger lies. Note that at the top of the RSI channel a big, fat bubble is forming and that is keeping the market pressured to the downside and should it burst, expect the market to take a steep nosedive. But that could be a bullish development because it would blow the fluff off the top and put the market on a solid footing to advance anew.

    More reason to stay on the sidelines and see how the market develops from here.

    (click to enlarge)

    This commodity index [DBC] had a strong burst to the upside while well supported by its RSI strength indicator and to a lesser extend by its MACD momentum bars. But for as long as its MA lines configuration remains bearish [green line above the red] this energy-fed commodity rally will soon falter.

    (click to enlarge)

    Everything about this NASDAQ 100 index [NDX] looks bullish. But this index has shot up too far and needs to come back a bit to catch its breath and consolidate. But after that, NASDAQ is all set to rally further. Its MA lines configuration remains strongly bullish [green line below the red] and the MACD momentum bars appear to be finally climbing on top of the demarcation line.

    (click to enlarge)

    Out of nowhere the all important small-caps [RUT] romped to the upside. Well supported by its MACD momentum bars and RSI strength indicator as well as the bullish MA lines configuration [green line below the red] this index is in an opportune position to regain its leadership during the next leg of this rally.

    (click to enlarge)

    Although this natural gas index [FCG] has shot up too far too fast, it is a harbinger that the energy sector is here to stay. This index is well supported by strong MACD momentum bars, a bullish RSI strength indicator and a renewed bullish MA lines configuration [green line below the red.]

    (click to enlarge)

    Everything about this energy index [XLE] is bullish, except that it has shot up too fast, and that has formed a bubble at the top of its RSI channel. This implies that the energy sector has to pull back in order to give this bubble a chance to deflate. If not, expect this bubble to burst and send the energy sector into a steep nosedive. In any event, it would be bullish for energy and give this sector renewed traction to the upside.

    (click to enlarge)

    Although the MACD momentum bars for [GOLD] appear to be bullish on top of the demarcation line, for as long as the MA lines configuration remains bearish [green line above the red] gold will remain bearish as well.

    (click to enlarge)

    Every aspect of this oil index [WTIC] remains bullish. So, one can expect the price of oil to either drift higher, or drift sideways along the current price level. But there is no sign that oil could start trending lower.

    (click to enlarge)

    While for now it is still best to just observe the market from the sidelines, here are some favored ETFs to keep on tap for when the market comes your way.

    Leveraged Bull ETFs:

    Nat-Gas 2x (NYSEARCA:GASL), India 2x (NYSEARCA:INDL), Semis 3x (NYSEARCA:SOXL), Energy 3x (NYSEARCA:ERX), Technology 3x (NYSEARCA:TECL), NASDAQ 3x (NASDAQ:TQQQ), Oil & Gas 2x (NYSEARCA:DIG), S&P 500, 3x (NYSEARCA:UPRO), S&P 500, 3x (NYSEARCA:SPXL), Health Care 3x (NYSEARCA:CURE), Real Estate 3x (NYSEARCA:DRN), Mid-Caps 3x (NYSEARCA:UMDD), China 3x (NYSEARCA:YINN), Mid-Caps 3x (NYSEARCA:MIDU), Alerian 2x (NYSEARCA:MLPL), NASDAQ 2x (NYSEARCA:QLD), Materials 2x (NYSEARCA:UYM), Biotech 2x (NASDAQ:BIB), Financials 3x (NYSEARCA:FAS), DOW 3x (NYSEARCA:UDOW), S&P 500, 2x (NYSEARCA:SSO), Small-Caps 3x (NYSEARCA:TNA), DOW 2x (NYSEARCA:DDM), Russell 2000, 2x (NYSEARCA:UWM).

    Non-Leveraged Long ETFs:

    India (NYSEARCA:SCIF), India 50 (NASDAQ:INDY), Oil & Gas (NYSEARCA:FRAK), Semis (NASDAQ:SOXX), Oil Exploration (NYSEARCA:IEO), Energy Infra. (NYSEARCA:MLPX), Energy (NYSEARCA:PXI), Oil Services (NYSEARCA:OIH), Oil Equipment (NYSEARCA:IEZ), Transports (NYSEARCA:XTN), Pharma (NYSEARCA:XPH), Biotech (NYSEARCA:PBE), Technology (NASDAQ:QTEC), S&P 500 (NYSEARCA:RPV), Nat-Gas (NYSEARCA:FCG)

    Industrials (NYSEARCA:FXR).

    Leveraged Bear ETFs:

    Commodity 2x (NYSEARCA:CMD), Gold Miners 3x (NYSEARCA:DUST), Russell 2000, 2x (NYSEARCA:TWM), DOW 2x (NYSEARCA:DXD), Financials 2x (NYSEARCA:SKF), S&P500, 2x (NYSEARCA:SDS), Russell 2000, 3x (NYSEARCA:SRTY), Small-Caps 3x (NYSEARCA:TZA), NASDAQ 2x (NYSEARCA:QID), Emerging Markets 2x (NYSEARCA:EEV), DOW 30, 3x (NYSEARCA:SDOW), Financials 3x (NYSEARCA:FAZ), Biotech 2x (NASDAQ:BIS), S&P 500, 3x (NYSEARCA:SPXS).

    Non-Leveraged Short ETFs:

    Russell 2000 (NYSEARCA:RWM), DOW 30 (NYSEARCA:DOG), Mid-Caps (NYSEARCA:MYY), EAFE (NYSEARCA:EFZ), S&P 500 (NYSEARCA:SH), Active Bear (NYSEARCA:HDGE), NASDAQ (NYSEARCA:PSQ).

    GOOD LUCK!

    Jun 16 9:48 AM | Link | Comment!
  • Slow And Steady

    When equities continue to rally while breadth and volume wane and the MACD momentum bars remain south of their demarcation line, it's best to stay out of this game and let someone else be the hero and chase tiny gains in a sideways-moving market.

    There is a lack of enthusiasm for this rally out there, which shows that market participants don't trust this thing which is being fuelled by the tail-end of the Fed's efforts to taper its easy-money QE programs. All of which makes for a bad entry point to buy this market at the current price. At least that is the way the Nay-Sayers out there see it.

    They point to ETF and mutual funds which saw over a billion dollars worth in outflows this quarter, while bonds received over 30 billion dollars in new money. Over the past couple of months there has been an increase of money-flows out of stocks and back into bonds, as skepticism toward U.S. equities has extended from individuals to institutions. Global money managers raised their cash-holdings to a two-year high which caused the trading volume in the S&P 500 sectors to sink to the lowest level since before this bull market began in March 2009.

    Wall Street has been floating along in an uneasy calm near zero momentum to either side, which an increasing number of market strategist perceive as a looming threat to a volatile selloff.

    But since this market is set to spring either way, how about a looming surge to the upside?

    When you check this [SPX] weekly chart you'll note that yes, this index advanced ever since the beginning of last year, while being well supported by its exceedingly bullish Moving-Average configuration [green line below the red line] and a positive RSI strength indicator which spent most of that time in its bullish territory.

    But then note that since the beginning of this year the MACD momentum bars were hanging from their demarcation line into bearish territory, and that spells doom for any seemingly sustained market advance. But there is hope!

    Did you notice that the last entry of a MACD momentum bar is at the top of the demarcation line? If more bars follow, expect this rally to gain strength for reaching higher highs in the months ahead.

    Meanwhile, slow and steady is making headway for this market.

    (click to enlarge)

    NASDAQ [NDX] and the small-caps [SML] are signaling that the bulls are on the way back and ready to put the market on track to higher highs for the sixth year in a row. Relative weakness in these two indexes between February and May has held the overall market back from gaining any meaningful momentum to the upside. But that is about to change.

    Note that while both indexes were rallying with the support of their respective MA lines configurations [green line below the red] and RSI strength indicators in bullish territories, the MACD momentum bars remained stuck in their respective bearish territories and are still causing a drag on the overall market. But now these bars are poised to rise back above the demarcation line, which will spark renewed upside momentum which has been lagging lately.

    (click to enlarge)

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    Since last May the commodity market [DBC] has been consolidating and now that at long last its MA lines configuration has turned bullish again [green line below the red] expect commodities generally to join this market's rally.

    (click to enlarge)

    When you check these Troika charts, you'll note that the two bull components [RSP] and [SPXL] show no letup in their bullish romp to higher highs. In fact, have reached bubble territory and are in need of an urgent pullback and some consolidation. That would put the market on track for further rallies down the road.

    Meanwhile, the bear component of this Troika [SPXS] remains totally comatose with its MA lines configuration sharply negative. For as long as that is the case, the bear has no chance to bring this market down in a meaningful correction.

    (click to enlarge)

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    (click to enlarge)

    Stuck at the bottom of a deep pit, [GOLD] continues to struggle to see daylight again.

    (click to enlarge)

    Oil [WTIC] remains in a consolidation mode. With its MA configuration totally neutral as the green and red lines are stuck together, oil is in no condition to move decisively into the bull's or bear's camp.

    (click to enlarge)

    Here are some favored ETFs to keep at the ready for when the market comes your way.

    Leveraged Bull-ETFs:

    NASDAQ 100, 2x (NYSEARCA:QLD), EAFE 2x (NYSEARCA:EFO), DOW 30, 2x (NYSEARCA:DDM), Developed Markets 3x (NYSEARCA:DZK), S&P 500, 3x (NYSEARCA:UPRO), DOW 30, 3x (UPRO), NASDAQ 100, 3x (NASDAQ:TQQQ), S&P 500, 2x (NYSEARCA:SSO), Financials 2x (NYSEARCA:UYG), S&P 500, 3x (NYSEARCA:SPXL), Regional Banks 2x (NYSEARCA:KRU), Energy 3x (NYSEARCA:ERX), Biotech 2x (NASDAQ:BIB), Russell 2000, 3x (NYSEARCA:URTY), Small-Caps 3x (NYSEARCA:TNA), Mid-Caps 3x (NYSEARCA:MIDU), Semis 3x (NYSEARCA:SOXL), India 3x (NYSEARCA:INDL), Retail 3x (NYSEARCA:RETL), Industrials 2x (NYSEARCA:UXI), Health-Care 2x (NYSEARCA:RXL), Emerging Markets 2x (NYSEARCA:EET), Small-Caps 2x (NYSEARCA:SAA), Consumer Services 2x (NYSEARCA:UCC).

    Non-Leveraged Long ETFs:

    Mid-Caps (NYSEARCA:IWP), EAFE (NYSEARCA:EFA), NASDAQ (QQQQ), Industrials (TYJ), Discretionary (NYSEARCA:XLY), Oil-Services (NYSEARCA:OIH), Biotech (NYSEARCA:XBI), S&P 500 (NYSEARCA:IVV), Home-Construction (NYSEARCA:ITB), India (NYSEARCA:SCIF), Small-Caps (NYSEARCA:RZG), Materials (NYSEARCA:XLB), Energy (NYSEARCA:XLE), Semis (S0XX), Russell 2000 (NASDAQ:VTWO), India (BATS:INDA), Transports (NYSEARCA:XTN), Financials (NYSEARCA:IYF), Health-Care (TH),

    Leveraged-Bear ETFs:

    Mid-Caps 3x (NYSEARCA:MIDZ), Semis 3x (NYSEARCA:SOXS), Oil 2x (NYSEARCA:SCO), Technology 3x (NYSEARCA:TECS), Small-Caps 3x (NYSEARCA:TZA), Energy 2x (NYSEARCA:DUG), Financials 3x (NYSEARCA:FAZ), S&P100, 3x (NASDAQ:SQQQ), Materials 2x (NYSEARCA:SMN), Industrials 2x (NYSEARCA:SIJ), S&P 500, 3x (NYSEARCA:SPXU).

    Non-Leveraged Short ETFs:

    Emerging Markets (NYSEARCA:EUM), Russell 2000 (NYSEARCA:RWM), Financials (NYSEARCA:SEF), S&P 500 (NYSEARCA:SH), Small-Caps (NYSEARCA:SBB), DOW 30, (NYSEARCA:DOG), Equity-Bear (HDGF), S&P 100 (NYSEARCA:PSQ), Oil & Gas (NYSEARCA:DDG).

    GOOD LUCK!

    Jun 10 8:33 AM | Link | Comment!
  • Timing Is Everything.

    Last week, a couple of big-guns in the investment industry came out with some dire predictions. As Merrill Lynch has it, there will be a sharp "melt-up" in the market this summer, only to be followed by a deep "melt-down" correction in the fall.

    How did they come to this conclusion? Fact is that nobody knows what the market will do tomorrow, leave alone a few months from now and that includes Merrill Lynch. Sure, with enough practice and some insights one can take an educated guess one way or the other, and that how the market's bulls and bears are being created. Meanwhile, the market has this nasty habit of doing nothing or just do the opposite of what is expected of it.

    Then there is BlackRock, the world's largest asset manager proclaiming that leverage bull and bear ETFs are set to blow up the ETF industry. Are they saying that the tail will wag the dog?

    ETFs are nothing more but the shadows of the underlying indexes. Get the direction of the index right, and the appropriate ETF will follow. Sure, with leveraged bull and bear ETFs these shadows can stretch too far too fast in either direction, and this is why the greedy in this game get hammered. Refusing to take profits because more of the same appears to lie ahead, is the biggest and most frequent mistake an ETF trader can make.

    Traders like that fear that if they are not in the market they'll miss the next leg up. Yet, not to be in the market but to just watch and wait for the right "setup" to show up, is often the best strategy to use. The key to successful ETF trading is ability to recognize a high-probability setup by the market and specific index, and then to pull the trigger and go all out.

    While 2013 was mostly a banner year for ETF trades, so far 2014 has been a whipsaw market best to stay out of and let someone else risk dollars in order to gain pennies. But things appear to be changing in favor of the bulls and the long wait for the right market-setup during the first half of this year could soon be over and happy "trigger-time" here again.

    Check the S&P benchmark index [SPX] and note that at the beginning of May its Moving-Average configuration was totally neutral with the red and green lines clinging together. This is the kind of situation where the market can slip either way, and slip violently. Sure, the market did slip but then snapped back while the SPX was forming a double bottom, which is a bullish signal most of the time. The MA lines configuration also turned bullish with the green line below the red, while the RSI strength indicator and MACD momentum bars remained in their respective bullish territories.

    So at first glance, trigger-time has arrived although it may take another week or two for the market to confirm it. (click to enlarge)

    Despite a steep nosedive in March and April, NASDAQ [NDX] did not lose its bullish MA lines configuration [green line below the red] the result of which is the strong rally so far this month. But with its MACD momentum bars in bearish territory below the demarcation line, this rally is suspect. But it appears that these bars are about to rise above this line, which would make the day for the bulls. Also, that the RSI strength indicator is solid in its bullish territory is a plus for the market.

    (click to enlarge)

    According to this [CRB] index the commodity market is balancing on a razor's edge. Its MA lines [green and red] configuration is totally neutral, without any bias to go either way. The same is the case with the MACD momentum bars while the RSI strength indicator has slipped into bearish territory. All of this means nail-biting time for the commodity market.

    (click to enlarge)

    Even though this small-cap index [RUT] has snapped off the bottom, for as long as its MACD momentum bars keep hanging deep in bearish territory below the demarcation line, small-caps won't have a chance to rally in any meaningful way. The RSI strength indicator shows little inclination to move one way or the other, and so it keeps sitting at dead neutral.

    Yet, for this market's rally to kick back into gear, the small-caps need to be out front. To this end, a good omen is the bullish configuration of its MA lines [green line below the red] which could give the small-caps the moxie to lead the next leg of this rally.

    (click to enlarge)

    These tree Troika charts RSP, SPXL and SPXS reflect the bullish bias of this market. After some volatile zigzag sideways moves since early March, the two bull-components of this Troika [RSP] and [SPXL] finally got their act together in early May. Until then, it looked as if the market was losing its grip and plunge to the nether regions. But then, the respective MA lines configurations of these two indexes turned bullish again with the green line below the red, and that caused the market to regain its footing to the upside. Both the respective MACD momentum bars and RSI strength indicators turned bullish as well, and that is providing the lift for a continuous rally.

    Not wanting to spoil this bullish outlook for the market, the bear [SPXS] crawled back into its deep hole at the bottom of a deep pit, and it is anyone's guess how much longer it will remain in hibernation.

    (click to enlarge)

    (click to enlarge)

    (click to enlarge)

    Then there is this VIX bull, which is the inverse of the VIX fear index. There isn't any, and that has quite few savvy market strategists nervous as they see that as the calm before the storm. It just doesn't feel right and begs the question how come with investors' fear seemingly all gone there is no euphoria, not even investors' enthusiasm for the market?

    Now here could be one of those rare occasions where a sharp selloff could clear the air and be bullish for the bulls.

    (click to enlarge)

    This market forecasting junk-bond canary [JNK] just doesn't appear to get tired of whistling a bullish tune about the market. This index continues to be well supported by its bullish MA lines configuration [green line below the red] and a RSI strength indicator that is sitting right at the top of its bullish territory. Yet, its MACD momentum bars continue to be bearish below the demarcation line as they have been since early March, and that is a concern for the market. It means that something is out of whack with the market that is not apparent right now.

    (click to enlarge)

    The yellow metal [GOLD] remains a basket case, except for the shorts and bear ETFs. Here are a few of them:

    (NASDAQ:DSLV), (NYSEARCA:ZSL), (NYSEARCA:DUST), (NYSEARCA:GLL), (JDST.)

    (click to enlarge)

    OIL [WTIC] is stuck between a bull and a bear. Its MA lines configuration is totally neutral as the red and green MA lines keep sticking together. The MACD momentum bars show no momentum to either side while the RSI strength indicator is sitting close to its neutral line as well. So which way from here for the price of oil is anyone's guess.

    (click to enlarge)

    Records show that sideways moving markets during the firs half of the year have the pleasant habit of breaking upside records during the second half. So here is something to look forward to.

    Just keep in mind that the key to successful ETF trading is ability to wait for and then recognize a high-probability market setup when it appears.

    It looks as if such a setup is close at hand. Just give the market another week or two to confirm it.

    Here are some favored ETFs for when that time comes.

    Leveraged Bull-ETFs:

    DOW 30, 2x (NYSEARCA:DDM), S&P 500, 3x (NYSEARCA:SPXL), Mid-Caps 2x (NYSEARCA:MVV), Mid-Caps 3x (NYSEARCA:MIDU), S&P 500, 2x (NYSEARCA:SSO), Financials 3x (NYSEARCA:FAS), S&P 500, 3x (NYSEARCA:UPRO), Small-Caps 3x (NYSEARCA:TNA), Dow 30, 3x (NYSEARCA:UDOW), Russell 2000, 2x (NYSEARCA:UWM), Russell 2000, 3x (NYSEARCA:URTY), NASDAQ 2x (NYSEARCA:QLD), NASDAQ 3x (NASDAQ:TQQQ), Biotech 2x (NASDAQ:BIB), Regional Banking 2x (NYSEARCA:KRU), Technology 2x (NYSEARCA:ROM), Semis 3x (NYSEARCA:SOXL), Health-Care 3x (NYSEARCA:DRN).

    Non-Leveraged Long ETFs:

    EAFE (NYSEARCA:EFA), Info Tech (NYSEARCA:VGT), NASDAQ 100 (NASDAQ:QQQ), Semis (NYSEARCA:XSD), Transports (NYSEARCA:IYT), Pharma (NYSEARCA:PJP), Small-Caps (NYSEARCA:DFE), Russell 2000 (NASDAQ:VTWV), Materials (NYSEARCA:IYM), Semis (NYSEARCA:SMH), Technology (NASDAQ:QTEC), Industrials (NYSEARCA:IYJ).

    Leveraged Bear-ETFs:

    DOW 30, 2x (NYSEARCA:DXD), Emerging Markets 3x (NYSEARCA:EDZ), Financials 3x (NYSEARCA:FAZ), NASDAQ 2x (NYSEARCA:QID), S&P 500, 2x (NYSEARCA:SDS), DOW 30, 3x (NYSEARCA:SDOW), NASDAQ 3x (NASDAQ:SQQQ), Russell 2000, 3x (NYSEARCA:SRTY), Financials 3x (FAZ), Russell 2000, 3x (NYSEARCA:TZA).

    Non-Leveraged Short ETFs:

    Small-Caps (NYSEARCA:SBB). Emerging Markets (NYSEARCA:EUM), Financials (NYSEARCA:SEF), DOW (NYSEARCA:DOG), Russell 2000 (NYSEARCA:RWM), S&P 500 (NYSEARCA:SH), Mid-Caps (NYSEARCA:MYY), NASDAQ (NYSEARCA:PSQ), Active Bear (NYSEARCA:HDGE).

    GOOD LUCK!

    Jun 02 10:47 AM | Link | Comment!
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