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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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  • Down Week For The Market - Excellent! 0 comments
    Jun 16, 2014 9:48 AM

    This was the week when the market registered two triple-digit tumbles in a row between last Wednesday and Thursday. But by the following Friday's close, the market had again reversed course with the DOW closing double digits to the upside. This tango has been going on for months, and just shows the resiliency of this market. Although volume and upside-momentum have been lousy, the market was able to steadily ratchet higher and now has become top-heavy and in danger of keeling over.

    Not only that, the two bull components of this Troika [RSP] and [SPXL] were blowing bubbles at the top of the RSI channel, which is always a signal to get out of the game for awhile and just watch how the ball bounces. Although the Moving Average lines of these components had formed bullish configurations [green lines below the red] the MACD momentum bars had slipped into their respective bearish territories below the demarcation line and that can put the kibosh on any rally. But by May these bars were back in bullish territory above this line, and that gave the green light for the rally to continue. But with bubbles appearing on top of the RSI channels of the RSP and SPXL, it's a good thing that the market had a down week so it can search for renewed traction at a lower level.

    The good thing about this Troika is that the bear component [SPXS] remains stuck at the bottom of a deep pit without a chance of climbing out of it any time soon. This means that while temporary pullbacks are in the cards, a full-blown correction is not.

    Meanwhile, there are plenty of headwinds out there for the market to get through. The violence in Iraq is sending oil prices thorough the roof threatening the still fragile recovery of the economy. The surge of the Suni-Islamists could divide Iraq and establish a terrorist state, and that is giving Washington a headache. Not only that, but the surprise defeat of a key-house Republican is causing U.S. political uncertainty while lousy economic growth forecasts by the world's central banks all combine to make market participants a bit jumpy.

    Still, according to the projections of these Troika charts the market is forming a base for the upside, and not a ceiling from which to nosedive the other way.

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    The consumer discretionary sector [XLY] is a leading indicator of the market and that it had rallied strongly is a bullish omen for the market in the weeks ahead. But it had shot up too fast and now has to take a breather and consolidate. For as long as its MA lines configuration remains bullish with the green line below the red, so will the market.

    (click to enlarge)

    This market forecasting junk-bond canary [JNK] just doesn't want to stop pointing to bullish markets ahead. That its MACD momentum bars are finally beginning to climb on top of the demarcation line suggests that momentum is finally beginning to support the market's rallies.

    But there's where the danger lies. Note that at the top of the RSI channel a big, fat bubble is forming and that is keeping the market pressured to the downside and should it burst, expect the market to take a steep nosedive. But that could be a bullish development because it would blow the fluff off the top and put the market on a solid footing to advance anew.

    More reason to stay on the sidelines and see how the market develops from here.

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    This commodity index [DBC] had a strong burst to the upside while well supported by its RSI strength indicator and to a lesser extend by its MACD momentum bars. But for as long as its MA lines configuration remains bearish [green line above the red] this energy-fed commodity rally will soon falter.

    (click to enlarge)

    Everything about this NASDAQ 100 index [NDX] looks bullish. But this index has shot up too far and needs to come back a bit to catch its breath and consolidate. But after that, NASDAQ is all set to rally further. Its MA lines configuration remains strongly bullish [green line below the red] and the MACD momentum bars appear to be finally climbing on top of the demarcation line.

    (click to enlarge)

    Out of nowhere the all important small-caps [RUT] romped to the upside. Well supported by its MACD momentum bars and RSI strength indicator as well as the bullish MA lines configuration [green line below the red] this index is in an opportune position to regain its leadership during the next leg of this rally.

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    Although this natural gas index [FCG] has shot up too far too fast, it is a harbinger that the energy sector is here to stay. This index is well supported by strong MACD momentum bars, a bullish RSI strength indicator and a renewed bullish MA lines configuration [green line below the red.]

    (click to enlarge)

    Everything about this energy index [XLE] is bullish, except that it has shot up too fast, and that has formed a bubble at the top of its RSI channel. This implies that the energy sector has to pull back in order to give this bubble a chance to deflate. If not, expect this bubble to burst and send the energy sector into a steep nosedive. In any event, it would be bullish for energy and give this sector renewed traction to the upside.

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    Although the MACD momentum bars for [GOLD] appear to be bullish on top of the demarcation line, for as long as the MA lines configuration remains bearish [green line above the red] gold will remain bearish as well.

    (click to enlarge)

    Every aspect of this oil index [WTIC] remains bullish. So, one can expect the price of oil to either drift higher, or drift sideways along the current price level. But there is no sign that oil could start trending lower.

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    While for now it is still best to just observe the market from the sidelines, here are some favored ETFs to keep on tap for when the market comes your way.

    Leveraged Bull ETFs:

    Nat-Gas 2x (NYSEARCA:GASL), India 2x (NYSEARCA:INDL), Semis 3x (NYSEARCA:SOXL), Energy 3x (NYSEARCA:ERX), Technology 3x (NYSEARCA:TECL), NASDAQ 3x (NASDAQ:TQQQ), Oil & Gas 2x (NYSEARCA:DIG), S&P 500, 3x (NYSEARCA:UPRO), S&P 500, 3x (NYSEARCA:SPXL), Health Care 3x (NYSEARCA:CURE), Real Estate 3x (NYSEARCA:DRN), Mid-Caps 3x (NYSEARCA:UMDD), China 3x (NYSEARCA:YINN), Mid-Caps 3x (NYSEARCA:MIDU), Alerian 2x (NYSEARCA:MLPL), NASDAQ 2x (NYSEARCA:QLD), Materials 2x (NYSEARCA:UYM), Biotech 2x (NASDAQ:BIB), Financials 3x (NYSEARCA:FAS), DOW 3x (NYSEARCA:UDOW), S&P 500, 2x (NYSEARCA:SSO), Small-Caps 3x (NYSEARCA:TNA), DOW 2x (NYSEARCA:DDM), Russell 2000, 2x (NYSEARCA:UWM).

    Non-Leveraged Long ETFs:

    India (NYSEARCA:SCIF), India 50 (NASDAQ:INDY), Oil & Gas (NYSEARCA:FRAK), Semis (NASDAQ:SOXX), Oil Exploration (NYSEARCA:IEO), Energy Infra. (NYSEARCA:MLPX), Energy (NYSEARCA:PXI), Oil Services (NYSEARCA:OIH), Oil Equipment (NYSEARCA:IEZ), Transports (NYSEARCA:XTN), Pharma (NYSEARCA:XPH), Biotech (NYSEARCA:PBE), Technology (NASDAQ:QTEC), S&P 500 (NYSEARCA:RPV), Nat-Gas (NYSEARCA:FCG)

    Industrials (NYSEARCA:FXR).

    Leveraged Bear ETFs:

    Commodity 2x (NYSEARCA:CMD), Gold Miners 3x (NYSEARCA:DUST), Russell 2000, 2x (NYSEARCA:TWM), DOW 2x (NYSEARCA:DXD), Financials 2x (NYSEARCA:SKF), S&P500, 2x (NYSEARCA:SDS), Russell 2000, 3x (NYSEARCA:SRTY), Small-Caps 3x (NYSEARCA:TZA), NASDAQ 2x (NYSEARCA:QID), Emerging Markets 2x (NYSEARCA:EEV), DOW 30, 3x (NYSEARCA:SDOW), Financials 3x (NYSEARCA:FAZ), Biotech 2x (NASDAQ:BIS), S&P 500, 3x (NYSEARCA:SPXS).

    Non-Leveraged Short ETFs:

    Russell 2000 (NYSEARCA:RWM), DOW 30 (NYSEARCA:DOG), Mid-Caps (NYSEARCA:MYY), EAFE (NYSEARCA:EFZ), S&P 500 (NYSEARCA:SH), Active Bear (NYSEARCA:HDGE), NASDAQ (NYSEARCA:PSQ).

    GOOD LUCK!

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