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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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  • Achilles Heel Of The Market.  0 comments
    Jan 13, 2014 8:21 AM

    Despite the consistently bullish Moving-Average configurations of the major indexes [green line below the red] the market keeps floating higher on nothing more but the fumes of an empty gas tank, and that is the "Achilles Heel" of the market.

    Check these Troika charts and note that the MACD momentum bars of the bull components [SPX] and [SPXL] are fading out of their respective bullish territories and no longer supply the support needed to boost this rally. Add to this that last Friday's payroll report came in much weaker than expected and that the companies' earnings reports don't appear to be much to crow about either, and one can visualize that this rally's gas tank is indeed empty.

    But this lousy economic news could revitalize the "bad is good" mentality in Wall Street and cause the Fed to take it easy with the tapering of its QE programs.

    Check the bear component of this Troika [SPXS] and note that at this stage of the game the bulls don't have much to worry about. The bear appears to be still hibernating in a deep hole at the bottom of a deep pit. The MA lines configuration remains exceedingly bearish for the bears [green line above the red] and its MACD momentum bars have faded away also. This means that while there is no strength to the upside, there is non to the downside either. This could cause the market to move sideways for a while and stay spring-loaded for either direction.

    But for now, this Troika remains bullish.

    (click to enlarge)

    (click to enlarge)

    (click to enlarge)

    Note that MA lines configuration for this bullish percent index [BPS] has turned bearish [green line above the red.] Its MACD momentum bars have slipped into dead neutral, and so is its RSI strengt indicator. This could make investors feel as if they're walking on egg-shells.

    (click to enlarge)

    Although this NASDAQ composite [COMPQ] maintains a very bullish MA lines configuration [green line below the red] its MACD momentum bars are fading into bearish territory. This could be a precursor to a steep nosedive for the tech-components in this game.

    (click to enlarge)

    Despite its continuous and strongly bullish MA lines configuration [green line below the red] which always indicates that an uptrend remains in gear, this DOW index [INDU] reflects a market that appears to be rolling over at the top. Also note that it's MACD momentum bars are poised to slip into bearish territory. So caution is called for.

    (click to enlarge)

    When last December the commodity demand index [BDI] went on a rampage to the upside, its RSI strength indicator blew a bubble. Last week this thing burst and sent the commodity market into a tailspin. Meanwhile its MA lines configuration turned bullish [green line below the red] which means that once things have settled down, commodities could be back in a rally mode again.

    The commodity producer's index [CRB] had a similar experience and also sports a bullish MA lines configuration. That's a good sign because these two commodity indexes will have to move in tandem to the upside, for a sustainable rally to kick into gear.

    (click to enlarge)

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    With its MA lines configuration strongly bullish since last October [green line below the red] this junk-bond market-forecasting [JNK] canary has also rallied on the fumes of an empty gas tank since last November. Even though this was and still is a very good call, its MACD momentum bars started to fade away and haven't recovered since, which is a bearish development for the market.

    (click to enlarge)

    When gold [GOLD] rallied off its low last December, managers of large hedge funds sharply increased their bets on a continuous rally for the price of the yellow metal. With the MACD momentum bars for gold strongly in bullish territory, they could be right.

    But for as long as the MA lines configuration remains bearish [green line above the red] short gold will remain a good call.

    (click to enlarge)

    Now here is a good example of the impact a bullish [green line below the red] or bearish [green line above the red] MA lines configuration has on an index. Should the currently bullish MA lines configuration for crude oil [WTIC] hold, crude will rally in the weeks ahead. But should this MA lines configuration turn bearish again, expect the price of oil to fade further.

    (click to enlarge)

    Considering all of the above, the current rally remains precarious at best. But for as long as the Troika remains bullish, so will the market with the Bull ETFs among the leaders of this game.

    So here are a few favorites to keep track of.

    Leveraged Bull ETFs:

    Junior Gold Miners 3x (NYSEARCA:JNUG), Healthcare 3x (NYSEARCA:CURE), 30 Yr Treasury 3x (NYSEARCA:TMF), Emerging Markets 3x (NYSEARCA:EDC), Energy 3x (NYSEARCA:ERX), Financials 3x (NYSEARCA:FAS), Mid Caps 3x (NYSEARCA:MIDU),

    Real Estate 3x (NYSEARCA:DRN), Small Caps 3x (NYSEARCA:TNA), Technology 3x (NYSEARCA:TECL), China 3x (NYSEARCA:YINN),

    S&P 500, 3x (NYSEARCA:SPXL), S&P 500, 3x (NYSEARCA:UPRO), Basic Materials 2x (NYSEARCA:UYM), China 2x (NYSEARCA:XPP),

    Oil 2x (NYSEARCA:UCO), DOW 30, 2x (NYSEARCA:DDM), Financials 2x (NYSEARCA:UYG), Gold 2x (NYSEARCA:UGL), Health Care

    2x (NYSEARCA:RXL), Japan 2x (NYSEARCA:EZJ), Mid Caps 2x (NYSEARCA:MVV), Biotech 2x (NASDAQ:BIB), NASDAQ 2x (NYSEARCA:QLD),

    Real Estate 2x (NYSEARCA:URE), Russell 2000, 2x (NYSEARCA:UWM), S&P 500, 2x (NYSEARCA:SSO), Silver 2x (NYSE:AGO),

    Mid Caps 3x (NYSEARCA:UMDD), NASDAQ 3x (NASDAQ:TQQQ), Russell 2000, 3x (NYSEARCA:URTY), Gold 3x (NASDAQ:UGLD),

    Silver 3x (NASDAQ:USLV),

    Non-Leveraged Long ETFs:

    Discretionary (NYSEARCA:FXD), Internet (NYSEARCA:FDN), Health Care (NYSEARCA:FXH), Industrials (NYSEARCA:FXR), Large Caps (NYSEARCA:FTA),

    Biotech (NYSEARCA:FBT), Technology (NYSEARCA:FXL), IPO Index (NYSEARCA:FPX), Developed Markets (NYSEARCA:PIZ), Biotech (NYSEARCA:PBE),

    Pharma (NYSEARCA:XPH), Banks (NYSEARCA:KBE), Regional Banks (NYSEARCA:KRE), Transports (NYSEARCA:XTN), Pharma (NYSEARCA:PJP),

    Small Caps (NYSEARCA:DWAS), Biotech (NYSEARCA:XBI), Discretionary (NYSEARCA:VCR), Discretionary (NYSEARCA:XLY), Japan (NYSEARCA:DXJ),

    Spain (NYSEARCA:EWP), Micro Caps (NYSEARCA:IWC), Russell 2000 (NYSEARCA:IWO), S&P 500 (NYSEARCA:IVW), Gold (NYSEARCA:DGP),

    Small Caps Dividend (NYSEARCA:DGS),

    Leveraged Bear ETFs:

    Oil 2x (NYSEARCA:DTO), Gold 2x (NYSEARCA:DZZ), Emerging Markets 3x (NYSEARCA:EDZ), Energy 3x (NYSEARCA:ERY), China 3x (NYSEARCA:YANG),

    Financials 3x (NYSEARCA:FAZ), Mid Caps 3x (NYSEARCA:MIDZ), Small Caps 3x (NYSEARCA:TZA), Gold Miners 3x (NYSEARCA:DUST),

    S&P 500, 3x (NYSEARCA:SPXS), Russell 2000, 3x (NYSEARCA:SRTY), S&P 500, 3x (NYSEARCA:SPXU), Euro 2x (NYSEARCA:EUO),

    Emerging Markets 2x (NYSEARCA:EEV), S&P 500, 2x (NYSEARCA:SDS), DOW 30, 2x (NYSEARCA:DXD), Financials 2x (NYSEARCA:SKF),

    NASDAQ 2x (NYSEARCA:QID), DOW 30, 3x (NYSEARCA:SDOW), NASDAQ 3x (NASDAQ:SQQQ),

    Non-Leveraged Short ETFs:

    Gold (NYSEARCA:DGZ), DOW (NYSEARCA:DOG), Emerging Markets (NYSEARCA:EUM), NASDAQ (NYSEARCA:PSQ), Small Caps (NYSEARCA:SBB),

    Russell 2000 (NYSEARCA:RWM), S&P 500 (NYSEARCA:SH), Real Estate (NYSEARCA:REK), Equity Bear (NYSEARCA:HDGE), Oil Fund (NYSEARCA:DNO),

    GOOD LUCK!

    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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