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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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  • More Of The Same - Down! 0 comments
    Dec 15, 2013 6:58 PM

    This is sure one schizophrenic market!

    While leading indexes' Moving Average configurations remain decidedly bullish, their underlying MACD momentum bars continue to be decidedly bearish. But since momentum trumps Moving Average configurations, it means that benchmark indexes are geared to the downside.

    Check this small-cap index [RUT] which has been one of the market leaders during this rally. Although it remains well supported by its bullish MA lines configuration [green line below the red line] but with its MACD momentum bars sliding into bearish territory, so will the market.

    But for this impending down-draft to turn into a major selloff, the MA configuration will have to turn bearish too, which means green line above the red. Simple, but very effective.

    (click to enlarge)

    Note that this "market-forecasting junk-bond canary" [JNK] did a pretty good job in guiding this rally. This little bird certainly was well supported by a considerably bullish MA configuration [green line below the red.] But its fading MACD momentum bars spell "danger" for any rally.

    (click to enlarge)

    Ever since last May, this rally was driven mainly by the small caps and the cyclical sector [CYC.] While this Index remains well supported by its bullish MA lines configuration [green line below the red] its bullish MACD momentum bars have faded away and are now building a strong case for the bears.

    (click to enlarge)

    Now, this important [SPXA50R] index leaves no doubt that the bears are on the move to take charge of the market. While the MACD momentum bars for this index have been building a case for the bears since the beginning of November by sliding below the demarcation line, it is only now that its MA lines configuration is turning bearish too [green line above the red.] So if you are long in the market - watch it!

    Most market participants are riding the high surf of this bull market in the belief that a potentially steep correction is not in the cards, just as was the case in 2006 and 2007 when investors were mostly unprepared when the music stopped in September 2008 and the dance was suddenly over.

    So while it is unlikely that this part of history will repeat itself anytime soon, it is still a good time while hoping for the best, to be prepared for the worst.

    (click to enlarge)

    While being well supported by a solidly bullish MA lines configuration [green line below the red] the tech heavy NASDAQ [NDX] had itself a pretty good rally since last July. But there are issues with its MACD momentum bars. Ever since last November they have been showing a bias to the bearish side of the demarcation line. At the same time, its RSI strength indicator is rapidly losing its moxie. If this continues, the MA configuration will turn bearish too and push NASDAQ into a probable steep nosedive.

    (click to enlarge)

    Check this Troika and note that its two bull components [SPX] and [SPXL] are still displaying pretty bullish MA lines configurations [green lines below the reds.] But since last November the MACD momentum bars of these indexes have turned decidedly bearish, and that does not bode well for the bulls in this game. Also note that the RSI strength indicators of these indicators have slipped into bearish territories as well.

    Check the Troika's bear component [SPXS] and note that while its MA lines configuration is still bearish for the bears [green line above the red] its MACD momentum bars have turned strongly bullish. This means that the bears are now in position to come charging off the bottom and maul the market. But with this market being totally schizophrenic, the RSI strength indicator sits at dead neutral which means that after their long hibernation the bears will have to put on some muscles first, before doing any charging. (click to enlarge)

    (click to enlarge)

    (click to enlarge)

    The commodity producers' index [CRB] reflects the volatility present in the commodity market. While the MA lines configuration of this index is exceedingly bearish [green line above the red] the underlying MACD momentum bars are exceedingly bullish above the demarcation line. But both of these indicators will have to move in tandem for a definitive trend to kick into gear.

    (click to enlarge)

    The commodity's demand index [BDI] also reflects the volatility in the commodity market. This index has soared too high too fast which has caused the RSI strength indicator to push into overbought territory. This implies that the BDI is about to keel over in a sharp pullback.

    But that would be a positive for the commodity market because it would allow it to find some good traction for a genuine advance.

    The extremely bullish MACD momentum bars are a puzzle. Where in the commodity market is that bullish stance coming from? Could be that the metals in this game have been depressed for so long that the slightest uptick produces a chart like this.

    One bullish indicator for commodities generally is the MA configuration of the BDI. Note that the green line has managed to climb above the red line and along with the bullish MACD momentum bars, that demands attention. (click to enlarge)

    Whatever the bullish momentum in the commodity market, it surely does not come from [GOLD.]

    Everything about this chart is bearish!

    The MA configuration for gold remains strongly negative [green line below the red.] The MACD momentum bars keep creeping along the demarcation line [at least that is neutral] and the RSI strength indicator appears to be anchored in bearish territory.

    (click to enlarge)

    This oil index [WTIC] has also shot up too far too fast, but after a consolidating pullback there is hope. Note that after an extremely bearish MA configuration beginning last October [green line above the red] the gap is beginning to close and once this configuration turns bullish again with the green line below the red, so will crude. The MACD momentum bars are solidly above the demarcation line, which means that bullish momentum is building within the crude oil spectrum.

    Also note that the RSI strength indicator for crude has settled into a consolidation mode, and that has bullish implications down the road.

    (click to enlarge)

    All in all, this has been a very successful year for the ETFs featured in this series of blogs and articles. With Washington's politicians slowly getting their act together, with the economy slowly but steadily expanding and with the "sidelined" cash finally getting back into the equity game, ETF trading should be a lot of fun in the months ahead.

    But until after the holidays it is still best to stay in cash and watch the market unfold as it should.

    Meanwhile, here are some favoured ETFs to keep on tap for when the time is right and the market comes your way.

    Leveraged Bull ETFs:

    China 3x (NYSEARCA:YINN), NASDAQ 3x (NASDAQ:TQQQ), Health Care 3x (NYSEARCA:CURE), Russell 2000, 3x (NYSEARCA:URTY),

    Small Caps 3x (NYSEARCA:TNA), Semis 3x (NYSEARCA:SOXL), Mid Cap 400, 3x (NYSEARCA:UMDD), Mid Cap 3x (NYSEARCA:MIDU),

    S&O 500, 3x (NYSEARCA:SPXL), S&P 500 3x (NYSEARCA:UPRO), Financials 3x (NYSEARCA:FAS), NASDAQ 2x (NYSEARCA:QLD),

    Developed Markets 3x (NYSEARCA:DZK), Russell 2000, 2x (NYSEARCA:UWM), Technology 3x (NYSEARCA:TECL),

    Energy (NYSEARCA:ERX), S&P 500, 2x (NYSEARCA:SSO), DOW 30, 3x (NYSEARCA:UDOW), Technology 2x (NYSEARCA:ROM),

    Materials 2x (NYSEARCA:UYM), Japan 2x (NYSEARCA:EZJ), Alerian 2x (NYSEARCA:MLPL), Real Estate 3x (NYSEARCA:DRN).

    Non-Leveraged Long ETFs:

    Solar (NYSEARCA:TAN), China Tech (NYSEARCA:CQQQ), Internet (NASDAQ:PNQI), Greece (NYSEARCA:GREK), Big Caps (NYSEARCA:FBG),

    Social (NASDAQ:SOCL), Biotech (NYSEARCA:PBE), Aerospace (NYSEARCA:ITA), Spinoffs (NYSEARCA:CSD), Gaming (NYSEARCA:BJK)),

    Euro Small Caps (NYSEARCA:DFE), Biotech (NYSEARCA:BBH), Energy (NASDAQ:PSCE), Health Care (NASDAQ:PSCH), Internet (NYSEARCA:FDN),

    Leisure (NYSEARCA:PEJ), Transports (NYSEARCA:XTN), Info Tech (NASDAQ:PSCT), Pharma (NYSEARCA:PJP), Small Caps (NYSEARCA:RWJ),

    Cons Discretionary (NYSEARCA:VCR), Small Caps (NYSEARCA:EES), Industrials (NYSEARCA:VIS), Cons Discretionary (NYSEARCA:XLY),

    S&P 500 (NYSEARCA:RPG), Euro Stoxx (NYSEARCA:FEZ), Biotech (NYSEARCA:FBT), Industrials (NYSEARCA:XLI), Small Caps 600 (NYSEARCA:VIOO).

    Leveraged Bear ETFs:

    Gold 2x (NYSEARCA:GLL), Gold Miners 2x (NYSEARCA:DUST), Silver 2x (NYSEARCA:ZSL), Nat Gas 3x (NYSEARCA:DGAZ), Oil 2x (NYSEARCA:DTO),

    Oil 2x (NYSEARCA:SCO), Real Estate 2x (NYSEARCA:SRS), DOW 30, 2x (NYSEARCA:DXD), Emerging Markets 2x (NYSEARCA:EEV),

    Oil & Gas 2x (NYSEARCA:DUG), DOW 30, 3x (NYSEARCA:SDOW), S&P 500 2x (NYSEARCA:SDS), Financials 2x (NYSEARCA:SKF), NASDAQ 2x (NYSEARCA:QID), Technology 3x (NYSEARCA:TECS), Russell 2000, 2x (NYSEARCA:TWM), S&P 500 3x (NYSEARCA:SPXS),

    Energy 3x (NYSEARCA:ERY), Financials 3x (NYSEARCA:FAZ), Semis 3x (NYSEARCA:SOXS), NASDAQ 3x (NASDAQ:SQQQ),

    Small Caps 3x (NYSEARCA:TZA).

    Non-Leveraged Short ETFs:

    Gold (NYSEARCA:DGZ), DOW 30 (NYSEARCA:DOG), S&P 500 (NYSEARCA:SH), EAFE (NYSEARCA:EFZ), Mid Caps (NYSEARCA:MYY),

    NASDAQ (NYSEARCA:PSQ), Russell 2000 (NYSEARCA:RWM), Oil (NYSEARCA:DNO), EAFE (NYSEARCA:EFU), Emerging Markets (NYSEARCA:EUM),

    Equity Bear (NYSEARCA:HDGE), Alerian (NYSEARCA:MLPS), Mid Caps (MYY), NASDAQ (PSQ), Real Estate (NYSEARCA:REK),

    Financials (NYSEARCA:SEF).

    Good Luck, Happy Holidays and all the best for 2014.

    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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