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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 Website... More
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  • Why Wait Till May And Go Away? 0 comments
    Apr 22, 2013 4:47 AM

    Sell now - that is the advise many savvy investment advisors are giving their clients.

    Wall Street managed a bit of a pull-back on Friday April 19, but it wasn't nearly enough to prevent the market as measured by the S&P 500 from suffering its worst week since last November. Ditto for the DOW and NASDAQ as these bellwether indexes suffered their largest weekly decline so far this year.

    So this could well be a make or break situation next week for the market which has been trading in one of the most volatile seesaw patterns in recent sessions.

    This rally is getting a bit weary, although the "buy the dips crowd" keeps buying the down-swings, but with lighter participation and that could usher in the "May-swoon" most market strategists seem to be expecting. So there could be a down-draft in the weeks ahead, just as the market had displayed for the last four Mays running. Talk about seasonality!

    This prospect is bringing out the doomsday Sayers in this game. They believe that this sell-off has just begun, with the bears convinced that the best is yet to come. The note that the market is in a "rolling over" mode and that by the beginning of May things will get really ugly for the bulls.

    The bulls reply, so what? Considering that the market has practically streaked to record highs over the past five months, it is time for a pullback and some consolidation before reaching for higher highs again.

    As the bulls have it, this market is only back to where it was six years ago, and just like the economy it is now at the bottom looking up, not at the top looking down.

    Yet, with the volatile swings displayed last week this market becomes more difficult to understand. The reason for this is that the market's indexes and sectors give credence to both, the bulls and the bears.

    First the case for the bulls:

    Check these three Troika charts and note that its large cap component the [SPX] had a couple of sharp moves to the downside. Yet, its MA lines configuration [green line below the red] remained solidly bullish. At the same time its RSI strength indicator and MACD momentum index remained in their respective bullish territories.

    Also note the Troika's bull-trend index [SPXL] shows the same positive MA lines configuration, which means that the upside factors for the bulls are still in pretty good shape.

    Meanwhile, the [SPXS] bear-trend index of this Troika tried to break out of the hole it finds itself in, but for as long as its MA lines configuration remain bearish [green line above the red] the bears won't have a chance to rally in any meaningful way.

    (click to enlarge)

    (click to enlarge)

    (click to enlarge)

    Supporting this Troika for the bulls is this market forecasting junk-bond Canary, [JNK], which just keeps on chirping a bullish tune while displaying a green line below the red, bullish MA lines configuration.

    (click to enlarge)

    One of the reasons that this market is supposed to be keeling over and heading for the scrap heap is the weakness in the discretionary consumer sector in the economy.

    But check this [XLY] index and note that while it had a couple of sharp down-drafts indicating that the discretionary consumer was indeed getting weary, its MA lines configuration remains solidly bullish as it has since last December, and that is a big plus for the bulls.(click to enlarge)

    OK, so at first glance this NASDAQ 100 index [NDX], looks like a disaster area that the bears are taking advantage of. But note the bullish MA lines configuration [green line below the red] which indicates that the sharp selloff is part of a consolidation process that could set up the overall market for a major advance.

    (click to enlarge)

    Again at first glance, this insider sentiment index [KNOW], has decidedly turned bearish over the past two weeks. Yet, the MA lines configuration of this index remain remarkably bullish, and that's what counts. (click to enlarge)

    Now the case for the bears:

    This sudden "rolling-over top" of this small-cap index [RUT], shows that the bears have the upper hand. Still, its green/red MA lines configuration remains bullish, but not by much. Even so, it could trigger a snap-rally to the upside. But if this configuration turns bearish with the green line above the red, watch out down below!

    This small-cap index has proven to be a reliable indicator of the market's next move. That it has been in a steep nosedive since the beginning of April has market-strategists wondering if the overall market is about to do the same.

    The MA lines configuration is the key. That the MACD momentum index along with the RSI strength indicator are both in their respective bearish territories, heightens the odds for the bears.(click to enlarge)

    This percent 50 indicator [SPX-50] shows that over the past two weeks the number of stocks in free-fall territory has increased. Also, the MA lines configuration of this index which was bearish since the beginning of March is widening the advantage for the bears.

    This means that the bulls won't have a chance to shift a sustainable rally into gear, and so the market will continue drifting to the downside.

    (click to enlarge)

    It is difficult for a sustainable market advance to get started without the participation of the commodity sectors [DBC]. Check this index and note that everything about commodities is unequivocally bearish, and that gives the equity bears of these commodities a big advantage. See the TSX.

    (click to enlarge)

    So it is of no surprise that the commodity-equities laden TSX is in a deep hole, pressured down by its extremely bearish MA lines configuration.

    (click to enlarge)

    Although gold [GOLD] had itself a bit of a snap-back attempt out of the deep hole it finds itself in, this yellow metal won't have a chance for as long as its red/green MA lines configuration remains so exceedingly bearish.

    (click to enlarge)

    Just like gold, the bearish MA lines configuration for oil [WTIC] will keep this index pressured to the downside.(click to enlarge)

    Although the U.S. dollar [USD] was sliding lower over the past few weeks, it's constantly bullish MA lines configuration assured that it would only be temporary. So now the Greenback is back to its usually bullish self again.

    (click to enlarge)

    All in all, this X:X ratio index shows that the bears will be in control for awhile. The stronger this index moves to the upside supported by an exceedingly bullish MA lines configuration, the stronger the pressure on the equity markets to the downside.

    (click to enlarge)

    So it is a tossup between the bulls and the bears, and in a situation like this it is best to stay in cash and wait to see when the market is going to display a recognizable shift in momentum for either the bulls or the bears.

    Last week's volatile market swings has whipsawed many investors in and out of the market. So it cannot be emphasized enough to let someone else be the hero and jump in first.

    There will be plenty of time for portfolio gains once the market regains its sense of direction. Meanwhile stand by and track ETFs for both sides of the fence. So here are a few favorites.

    Leveraged Bull ETFs:

    Healthcare 3x (NYSEARCA:CURE), Biotech 2x (NASDAQ:BIB) Healthcare 2x (NYSEARCA:RXL), Nat Gas 2x (NYSEARCA:BOIL), Real Estate 3x (NYSEARCA:DRN), Financials 3x (NYSEARCA:FAS), Mid Caps 3x (NYSEARCA:MIDU), Mid Caps 400, 3x (NYSEARCA:UMDD), DOW 30, 3x (NYSEARCA:UDOW), S&P 500, 3x (NYSEARCA:UPRO), S&P 500 3x (NYSEARCA:SPXL), Financials 2x (NYSEARCA:UYG), Russell 2000 3x (NYSEARCA:URTY), Small Caps 3x (NYSEARCA:TNA), Semis 3x (NYSEARCA:SOXL), Energy 3x (NYSEARCA:ERX), NASDAQ 100, 3x (NASDAQ:TQQQ), Technology 3x (NYSEARCA:TECL), Materials 2x (NYSEARCA:UYM).

    Non-Leveraged Long ETFs:

    Biotech (NYSEARCA:BBH), Nat Gas (NYSEARCA:UNG), Biotech (NASDAQ:IBB), Biotech (NYSEARCA:FBT), Consumer Staples (NYSEARCA:RHS), Health Care (NYSEARCA:IYH), Transports (NYSEARCA:XTN), Health Care (NYSEARCA:XLV), Real Estate (NASDAQ:IFGL), Biotech (NYSEARCA:XBI), Homebuilders (NYSEARCA:XHB), Pharma (NYSEARCA:PPH).

    Leveraged Bear ETFs:

    Gold Miners 2x (NYSEARCA:DUST), Inverse Silver 3x (NASDAQ:DSLV), Silver 2x (NYSEARCA:ZSL), Inverse Gold 3x (DGLD(, Gold 2x (NYSEARCA:GLL), Oil 2x (NYSEARCA:SCO), Materials 2x (NYSEARCA:SMN), Emerging Markets 3x (NYSEARCA:EDZ), Nat Gas 2x (NYSEARCA:GASX), Technology 3x (NYSEARCA:TECS), NASDAQ 100 2x (NYSEARCA:QID), Oil&Gas 2x (NYSEARCA:DUG), NASDAQ 100 3x (NASDAQ:SQQQ), S&P 500 2x (NYSEARCA:SDS), Russell 2000, 2x (NYSEARCA:TWM) DOW 30, 2x (NYSEARCA:DXD), Energy 3x (NYSEARCA:ERY), Semis 3x (NYSEARCA:SOXS), Financials 3x (NYSEARCA:FAZ), Mid Caps 3x (NYSEARCA:MIDZ), Nat Gas 3x (NYSEARCA:DGAZ).

    Non-Leveraged Short ETFs:



    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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