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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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  • A Goldilocks Market? 0 comments
    Apr 7, 2014 1:44 AM

    During last Friday's selloff, NASDAQ [NDX] and small cap sectors [TNA] were leading the market down just as they had led the market to record highs in previous months, and that has the bears in this game licking their chops.

    But as the bulls see it, last Friday's jobs report had "Goldilocks" written all over it, and that will give the market renewed traction to the upside. This report wasn't too weak to create fear among investors that the economic recovery and thereby the market would stall, but also not strong enough for the Fed; to speed up its tapering pace and so the market's momentum will remain geared to the upside.

    As some savvy market strategists have it, investors are stepping back from the highflying risk oriented cyclical sectors and that is a sign that the market is tired and in need of a pullback and some consolidation. Note that the NDX and TNA show the same chart patterns. Even though their respective Moving Average configurations remain bullish [green lines below the red] their respective MACD momentum bars hit bearish territories and ditto for their respective RSI strength indicators.

    While this has bearish implications for the market overall, last Friday's pullback was still only a temporary selling-squall. Only when the MA lines configurations turn bearish also, can the market be considered to have entered the early stage of a major correction.

    (click to enlarge)

    (click to enlarge)

    Check this weekly, large-cap [SPX] index and note that while its MA lines configuration remains exceedingly bullish [green line below the red] its momentum bars have slipped into bearish territory. In due time, this could spell trouble for the market, even the defensive sectors like [UTIL.]

    (click to enlarge)

    (click to enlarge)

    Check the Troika's snapshot of the market and note that the two bull components [SPX] and [SPXL] show strongly positive MA lines configurations [green lines below the red]. Yet, their respective MACD momentum bars remain in their bearish territories, as they have for most of March. If that trend continues, then it will be only a matter of time before the bulls lose upside momentum and the bears gain the upper hand.

    (click to enlarge)

    (click to enlarge)

    Even though the bear component of this Troika [SPXS] had a pretty good session last Friday, the bear is still unable to do real damage to the market. Its MA lines configuration remains strongly bearish for the bears [green line above the red] and its MACD momentum bars are back on the neutral line and so is its RSI strength indicator. So while some sort of a pullback is called for, a major correction is not in the cards and the bull market remains intact.

    (click to enlarge)

    Just like the bear index, this market's fear index [VIX] reflects investors' attitude toward the market which says "what - me worry?" The MA lines configuration remains bearish for the VIX [green line above the red] and its MACD momentum bars remain in bearish territory. This suggests complacency among investors and zilch momentum for a fear-spike.

    (click to enlarge)

    This market-forecasting junk-bond canary [JNK] remains as bullish as it has been since last November. This index's MA lines configuration [green below the red] continues to be strongly bullish, and so is its RSI strength indicator. But that its MACD momentum bars are sitting on the neutral line is an indication that the market's fuel-tank is empty, and it is anyone's guess how much longer this market can advance on fumes alone.

    (click to enlarge)

    The commodity market [GTX] is trying to hang in there. Its MA lines configuration [green line below red] remains bullish while its RSI strength indicator still manages to hang on to the neutral line. But its MACD momentum bars remain stuck in bearish territory as they have been since early March, and that makes it tough for the commodity market to gain any traction to the upside, and so the path of least resistance remains down.

    (click to enlarge)

    Although its index received a pretty good haircut over the past few weeks, [GOLD] is still a bull, but only for as long as its MA lines configuration remains bullish [green line below the red.] But with its MACD momentum bars solid in bearish territory, it won't take much to have the yellow metal morph into a bear as well.

    (click to enlarge)

    Oil [WTIC] is turning bearish. Its MA lines configuration has turned negative with the green line above the red, while its MACD momentum bars along with the RSI strength indicator remain neutral at best. That isn't good enough for a bullish call on oil.

    (click to enlarge)

    So this was another week when the DOW went up a hundred-plus points on one day, only to lose it all on another day. This showed once again that the market lacks momentum for either the bulls or the bears. That is a good time to stay out of the game until some momentum shows up and stick. Meanwhile, here are some favorite bull and bear ETFs to be used at the appropriate time.

    Leveraged Bull ETFs:

    Health Care 3x (NYSEARCA:CURE), Financials 3x (NYSEARCA:FAS), Mid Caps 3x (NYSEARCA:MIDU), Small Caps 3x (NYSEARCA:TNA), Technology 3x (NYSEARCA:TECL), Real Estate 3x (NYSEARCA:DRN), S&P 500 3x (NYSEARCA:UPRO), Basic Materials 2x (NYSEARCA:UYM), DOW 30, 2x (NYSEARCA:DDM), Financials 2x (NYSEARCA:UYG), Health Care 2x (NYSEARCA:RXL), Japan 2x (NYSEARCA:EZJ), Mid Caps 2x (NYSEARCA:MVV), NASDAQ 2x (NYSEARCA:QLD), Russell 2000, 2x (NYSEARCA:UWM), S&P 500, 2x (NYSEARCA:SSO), NASDAQ 3x (NASDAQ:TQQQ), Russell 2000, 3x (NYSEARCA:URTY).

    Non-leveraged Long ETFs:

    Discretionary (NYSEARCA:FXD), Health Care (NYSEARCA:FXH), Industrials (NYSEARCA:FXR), Large Caps (NASDAQ:FTA), Technology (NYSEARCA:FXL), Developed Markets (NYSEARCA:PIZ), Pharma (NYSEARCA:PJP), Discretionary (NYSEARCA:XLY), Banks (NYSEARCA:KBE), Regional Banks (NYSEARCA:KRE), Transports (NYSEARCA:XTN), Small Caps (NYSEARCA:DFE), Japan (NYSEARCA:DXJ), Russell 2000 (NYSEARCA:IWO).

    Leveraged Bear ETFs:

    Oil 2x (NYSEARCA:DTO), Gold 2x (NYSEARCA:DZZ), Emerging Markets 3x (NYSEARCA:EDZ), Energy 3x (NYSEARCA:ERY), 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 SRTY), Emerging Markets 2x (NYSEARCA:EEV), DOW 30, 2x (NYSEARCA:DXD), NASDAQ 3x (NYSEARCA:QID).

    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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