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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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  • Tragedy And The Market.  0 comments
    Jul 21, 2014 8:06 AM

    Wall Street took a sharp tumble last week's Thursday after the downing of a passenger jet in which 300 people died in Ukraine. At the same time Israel started all-out ground offensives in the Gaza strip, where most of the victims will again be among the civilian population.

    While this had market participants run for cover and the bears in this game licking their chops in anticipation of a steep correction, the market had a different idea and rallied strongly during Friday's trade, erasing most of Thursday's loss.

    Investors had realized that with the U.S. economy expanding, with the earnings season looking pretty good and with the Fed promising to keep interest rates at rock-bottom while goosing the easy money Q.E. a bit longer, the killings in Ukraine and Gaza actually presents a good buying opportunity, and so the market rallied after taking a steep nosedive the previous session.

    As the man said - you've got to buy when there is blood in the street, and there was plenty of it last week, with probably more on the way.

    It just shows how coldly analytical the market can be when faced with a buying opportunity.

    Meanwhile, an increasing number of market strategists figure that the market has reached nosebleed territory with a bull/bear ratio at four to one. According to "Investors' Intelligence" who runs this thing, that's the highest level since early 1987 and market participants can well remember what happened after that. But check this Troika and see what the market has in mind.

    Note that the two bull-components [RSP] and [SPXL] have snapped back from last week's selling squall and are now in a consolidation phase while being well supported by their respective bullish Moving-Average lines configurations [green lines below the red lines.]

    But these two bulls are also hitting a ceiling, and it remains to be seen if they have what it takes to break through to higher highs. For as long as the MACD momentum bars keep hanging from the demarcation line into bearish territory, the bulls will have a tough time advancing, if at all.

    It is the [SPXS] bear component of this Troika that is giving the bulls a chance. This index remains stuck at the bottom while under continued pressure from its exceedingly bearish MA lines configuration [green line above the red.] Also, the RSI strength indicator appears to be unable to rise above and stay above its demarcation line and that is a big negative for the bears and positive for the bulls. It may take a little time but the bulls do have the advantage in this game.

    (click to enlarge)

    (click to enlarge)

    (click to enlarge)

    Small-Caps [RUT] are usually instrumental in leading the market to higher highs, but this time they are certainly not much help for the market to decide which way is up. Although this index appears to be bouncing off the bottom, for as long as the MACD momentum bars are staying deep in bearish territory while ditto for its RSI strength indicator, the small-cap market remains vulnerable.

    But there is hope as the bullish MA lines configuration [green line below the red] suggests that after a consolidation period the small-caps may be able to lead the market in a renewed rally.

    (click to enlarge)

    The NASDAQ 100 index [NDX] keeps reaching deeper into nosebleed territory, which leaves this index facing an at least 100 point haircut, and that would be a good thing. It would bring the commodity market down to where it could find traction for a genuine advance. Sure, this index remains well supported by an exceedingly bullish MA lines configuration [green line below the red] and a RSI strength indicator that remains well in its bullish territory, but where is the MACD upside momentum? It has been stalling since the middle of last June, and that is the Achilles heel of the overall market.

    (click to enlarge)

    Check this [CRB] commodity producers' index and its twin the [BDI] commodity demand index and you can see why the commodity market is in such a mess. Both indexes are searching for a bottom while their respective MA lines configurations remain in a bearish mode [green lines above the red.] Also, their MACD momentum bars are hanging deep in bearish territories and the respective RSI strength indicators are blowing bubbles at the bottom. Now that is a sign that the commodity market is extremely oversold, which may lay the seed for a snap-back rally.

    (click to enlarge)

    (click to enlarge)

    This market-forecasting junk-bond canary [JNK] appears to have given up the ghost. That's no surprise after watching this thing blowing such a huge RSI bubble last month. Also note that ever since last March the rally of this junk-bond was fuelled by nothing more but the fumes of its empty MACD momentum gas tank. But for as long as the MA lines configuration of this index remain bullish [green line below the red] the market could find renewed traction and rally again. (click to enlarge)

    After the recent turmoil in the markets, this insiders' index [KNOW] remains remarkably stable, and that is a good omen for the markets. The insiders in this game appear to remain bullish for as long as the MA lines configuration of this index remains bullish as well [green line below the red.](click to enlarge)

    The yellow metal [GOLD] appears to be in a consolidation mode and in the process of building a takeoff plateau. While this index is moving sideways, its MA lines configuration has a bullish bias to it [green line below the red] and ditto for the RSI strength indicator. The MACD momentum bars are sitting on top of the demarcation line, all of which augurs well for the gold market in the months ahead.(click to enlarge)

    Oil [WTIC] sure seems to have a tough time getting its act together. During Wall Street's selloff last week, crude took to the sky in anticipation of a major supply disruption for the European energy market from Russia. But then crude took again a steep nosedive, which proves that it just hasn't got what it takes to rally to rally from here.

    (click to enlarge)

    During last week's selloff there was much talk in the media that the market's fear index [VIX] had spiked on its daily chart from the 11 to the 14 level. This was supposed to get the sky to fall and kill the little chickens down below.

    But to keep things in perspective, check the monthly chart of the VIX and note what a real VIX spike looks like. Also note that from the late 2010 to the present the VIX had a bearish MA lines configuration [green line above the red] which kept this fear index well contained during that time and the bulls in charge.

    But check the daily chart and note that last February the VIX did spike past the 20 level reading and it is at that point that Wall Street's little chickens will have something to worry about.

    (click to enlarge)

    (click to enlarge)

    All in all this market is setting up to rally again, but for now it's still consolidation time and that is a good time to just wait at the sidelines and watch the universe of the market unfold. Meanwhile keep the favored ETFs featured in these blogs on tap.

    Favored ETF sectors:

    Consumer Discretionary, Financials, Health-Care and Technology.

    Leveraged Bull ETFs:

    Energy 3x (NYSEARCA:ERX), Nat-Gas 3x (NYSEARCA:GASL), Oil&Gas 2x (NYSEARCA:DIG), Crude 2x (NYSEARCA:UCO), Banks 2x (NYSEARCA:KRU), China 3x (NYSEARCA:YINN), Real Estate 3x (NYSEARCA:DRN), S&P 500, 3x (NYSEARCA:SPXL), S&P 500, 3x (NYSEARCA:UPRO), DOW 30, 3x (NYSEARCA:UDOW), Mid-Caps 3x (NYSEARCA:UMDD), Technology 3x (NYSEARCA:TECL), S&P 500, 2x (SS0), Financials 3x (NYSEARCA:FAS), NASDAQ 2x (NYSEARCA:QLD), Small-Caps 3x (NYSEARCA:TNA), Developed Markets 3x (NYSEARCA:DZK), Japan 2x (NYSEARCA:EZJ), Financials 2x (NYSEARCA:UYG), Emerging Markets 3x (NYSEARCA:EDC), Semis 3x (NYSEARCA:SOXL), Health-Care 3x (NYSEARCA:CURE), Biotech 2x (NASDAQ:BIB), Gold Miners 2x (NYSEARCA:NUGT), Jr. Gold Miners 3x (NYSEARCA:JNUG).

    Non-Leveraged Long ETFs:

    Biotech (NASDAQ:IBB), Biotech (NYSEARCA:BBH), Pharma (NYSEARCA:XPH), Oil&Gas (NYSEARCA:FRAK), Oil-Services (NYSEARCA:OIH), Solar (NYSEARCA:TAN), Home-Construction (NYSEARCA:ITB), Discretionary (NYSEARCA:VCR), Industrials (NYSEARCA:IYJ), Technology (NYSEARCA:XLK), Semis (NASDAQ:SOXX), Financials (NYSEARCA:IYF), Russell 1000, (NYSEARCA:IWF), Technology (NYSEARCA:IYW), Japan (NYSEARCA:DXJ), S&P 500 (NYSEARCA:IVW), EAFE (NYSEARCA:EFA), Regional Banking (NYSEARCA:KRE), Gold-Miners (NYSEARCA:GDX).

    Leveraged Bear ETFs:

    Biotech 2x (NASDAQ:BIS), Health-Care 2x (NYSEARCA:RXD), Russell 2000, 2x (NYSEARCA:SKK), Oil 2x (NYSEARCA:DTO), Emerging Markets 3x (NYSEARCA:EDZ), Nat-Gas 3x (NYSEARCA:DGAZ), Mid-Caps 2x (NYSEARCA:MZZ), Small-Caps 3x (NYSEARCA:TZA), Technology 2x (NYSEARCA:REW), Mid-Caps 3x (NYSEARCA:MIDZ), S&P 500 3x (NYSEARCA:SPXU), Energy 3x (ERX), Oil&Gas 2x (NYSEARCA:DUG), NASDAQ 3x (NASDAQ:SQQQ), Small-Caps 2x (NYSEARCA:SDD), Financials (NYSEARCA:SKF).

    Non-Leveraged Short ETFs:



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