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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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  • February - Last Chance For The Bears? 0 comments
    Oct 21, 2013 9:34 AM

    Throughout 2013, Washington's politician's debt-ceiling brinkmanship and government shutdown gave the bears in this game a lot of chances to take the market down. But the best they could come up with were triple digit declines, followed by triple digit rallies, which had the benchmark S&P 500 closing at record highs. Still, lackluster volume levels during these rallies signaled that there was no conviction behind these market advances.

    After the initial euphoria over the opening of the U.S. government and avoiding going over the "fiscal cliff" faded, investors were beginning to realize that this agreement was good only till February, when the bears will get another chance to do serious damage to the economy and the market.

    One bright spot in this whole mess is that the Fed's "tapering" of its easy money QE programs will be off the table for some time to come and that makes for a bullish market environment.

    One of the better leading indicators is the small-caps which tend to lead the market when in a bull market mode, which is the case now.

    During the recent selloff squalls the small cap Russell 2000 surged from one new all-time high to another, and the performance gap between the small caps and large caps actually widened in favor of the small and mid-cap stocks.

    Chances are that for as long as the small cap sectors in this market keep reaching for higher highs, the market remains a bull and next February's potential fiscal "cliff-hanger" will fade away.

    Check this small cap chart [SML] and note that since December 2011 small caps have led the market consistently to the upside. Sure, there will be consolidated pullbacks ahead, but the upward momentum of the market stays intact.

    (click to enlarge)

    When you check these "Troika" charts note that the two bull components [SPX] and [SPXL] have surged too high too fast and are due for a pullback. But for as long as the MA lines configurations remain bullish, [green lines below the reds] so will these indexes.

    That the MACD momentum and RSI strength indicators are solid in their respective bullish territories is also a plus for the market.

    That the [SPXS] bear component of this Troika keeps digging a deep hole at the bottom of a deep pit is, well, bearish for the bears and bullish for the bulls. This index is being pressured down by its bearish MA lines configuration [green line above the red.] That both the MACD momentum index and RSI strength indicator are deep in their respective bearish territories is another indication that the bears are in trouble.

    The bottom-line here is that for as long as this Troika remains bullish, so will the market.

    (click to enlarge)

    (click to enlarge)

    (click to enlarge)

    Note that the NASDAQ [NDX] and the tech [XLK] are joint at the hip. After more or less consolidating between last August and October, the tech sector is boosting NASDAQ to higher highs. With both indexes solidly supported by their respective MA lines configurations, it appears that technology and NASDAQ will lead the market for some time to come.

    Also note that MACD momentum and RSI strength for both indexes are strongly supporting the market.

    (click to enlarge)

    (click to enlarge)

    It appears that the transport sector [TRAN] is displaying an "irrational exuberance" in relation to the economy. After blowing a bubble that burst last June and then another one in August, it looks as if this index is blowing another bubble this October.

    A bubble is formed when the red MA line moves too fast and too far above the green line. This implies that the distinction of a bubble lies in the eyes of the beholder. So take your pick.

    Sure, the economy is growing, but at that rate? So the Tran will have to come down and consolidate for a while in order to give the economy a chance to find some traction.

    (click to enlarge)

    This market-forecasting junk bond canary [JNK] appears to be suffering from an "irrational exuberance" also, as this index is shooting up too far too fast. Its MA lines configuration is extremely bullish [green line below the red,] which could signal a bubble in the making.

    But then again, maybe this little bird has its eyes on political Washington in February, and can see a bullish outcome. In any event, when JNK pulls back, it will be a buying opportunity.

    (click to enlarge)

    OK, this [NFO] is a smart-money index which also seems to be afflicted by something irrational which is causing this index to soar too high too fast. The same thing happened last June and August when smart-money did something really stupid when it blew two fat bubbles that consequently burst.

    But maybe this time it will be different. Sure, this index will come down, but it has a solid MA lines configuration [green below the red] which could project a stiff rally later on. After all, smart money usually has the inside track and maybe can see something good happening with the political negotiations next February.

    (click to enlarge)

    Although the commodity market appears to be consolidating while trending to the upside, for as long as its MA lines configuration remains bearish [green line above the red,] so will the commodities market.

    (click to enlarge)

    Gold is in a slump and will remain that way for as long as its MA lines configuration continues in a bearish mode [green line above the red.]

    (click to enlarge)

    Just like gold, oil is also in a slump and for as long as its MA lines configuration remains bearish [green above the red,] so will oil.

    (click to enlarge)

    The U.S. dollar [USD] should be soaring while gold and commodities generally are declining, but not this time. The greenback is reflecting Washington's political fiasco, and probably can sense a repeat performance next February.

    For as long as the U.S. dollar's MA lines configuration remains this bearish [green above the red,] the greenback will continue to dig a deep hole at the bottom of a deep pit.

    (click to enlarge)

    Although the undercurrents of the market remain bullish, the volatility between now and next February could be wicket. But should the market develop some intermediate momentum up or down, here are some favorite ETFs for you to consider.

    Leveraged Bull ETFs:

    Healthcare 3x (NYSEARCA:CURE), Financials 3x (NYSEARCA:FAS), Mid Caps 400, 3x (NYSEARCA:UMDD), Alerian 2x (MPL),

    Russell 2000, 3x (NYSEARCA:URTY), Small Caps 3x (NYSEARCA:TNA), Health Care 2x (NYSEARCA:RXL), DOW 30, 3x (NYSEARCA:UDOW),

    Biotech 2x (NASDAQ:BIB), S&P 500, 3x (NYSEARCA:UPRO), Financials 2x (NYSEARCA:UYG), S&P 500, 3x (NYSEARCA:SPXL),

    Mid Caps 2x (NYSEARCA:MVV), Energy 3x (NYSEARCA:ERX), Russell 2000, 2x (NYSEARCA:UWM), Real Estate 3x (NYSEARCA:DRN),

    Russell 2000, 3x (NYSEARCA:UKK), Nat Gas 3x (NYSEARCA:UGAZ), DOW 30, 2x (NYSEARCA:DDM), S&P 500, 2x (NYSEARCA:SSO),


    Materials 2x (NYSEARCA:UYM), Technology 3x (NYSEARCA:TECL), Emerging Markets 3x (NYSEARCA:EDC), Mid Caps 3x (NYSEARCA:MIDU),

    China 3x (NYSEARCA:YINN).

    Non-Leveraged Long ETFs:

    Home Construction (NYSEARCA:ITB), Home Builders (NYSEARCA:XHB), Biotech (NYSEARCA:BBH), Energy (PXL), Biotech (NYSEARCA:FBT),


    Mid Caps (NYSEARCA:IWS), Mid Caps 400 (NYSEARCA:IJJ), Health Care (NYSEARCA:IYH), Telecoms (NYSEARCA:IYZ), Banks (NYSEARCA:KBE),

    Real Estate (NYSEARCA:REM), Financials (NYSEARCA:VFH), Semis (NYSEARCA:USD), Info Tech (NYSEARCA:VGT), Shipping (NYSEARCA:SEA),

    Transports (NYSEARCA:XTN), Steel (NYSEARCA:SLX).

    Leveraged Bear ETFs:

    Gold Miners 2x (NYSEARCA:DUST), Silver 2x (NYSEARCA:ZSL), Inverse Gold 3x (NASDAQ:DGLD), Silver 2x (NYSEARCA:DTO),

    Emerging Markets 2x (NYSEARCA:EEV), Emerging Markets 3x (NYSEARCA:EDZ), NASDAQ 100, 2x (NYSEARCA:QID),

    Technology 3x (NYSEARCA:TECS), Materials 2x (NYSEARCA:SMN), NASDAQ 3x (NASDAQ:SQQQ), Real Estate 2x (NYSEARCA:SRS),

    Oil & Gas 2x (NYSEARCA:DUG), S&P 500 2x (NYSEARCA:SDS), DOW 30, 2x (NYSEARCA:DXD), Nat Gas 3x (NYSEARCA:GASX),

    Russell 2000 2x (NYSEARCA:TWM), Financials 2x (NYSEARCA:SKF), S & P 500 3x (NYSEARCA:SPXU), Semis 3x (NYSEARCA:SOXS),

    Energy 3x (NYSEARCA:ERY), Russell 2000 3x (NYSEARCA:SRTY), Small Caps 3x (NYSEARCA:TZA), Financials 3x (NYSEARCA:FAZ),

    Nat Gas 3x (NYSEARCA:DGAZ).

    Non-Leveraged Short ETFs:

    Gold (NYSEARCA:DGZ), Emerging Markets (NYSEARCA:EUM), NASDAQ 100 (NYSEARCA:PSQ), Active Bear (NYSEARCA:HDGE),

    S&P 500 (NYSEARCA:SH), DOW 30 (NYSEARCA:DOG), Russell 2000 (NYSEARCA:RWM), Oil (NYSEARCA:DNO), Financials (NYSEARCA:SEF),

    Russell 2000 (TBM).


    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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