Wall Street closed the third quarter with good solid gains even though September has proven to be the worst month for the Bulls. The others are October, November [etc. etc. etc.] Risk on, was very much the trading strategy which paid off well for the Bulls, but the Bears had the last laugh during the last trading week of the quarter.
There is a lot of headwind facing the market because there is little resolve in sight for the financial and political problems in the Eurozone, and the looming fiscal cliff and political brinkmanship in Washington. Also, as the Bears in this game have it this market is grossly overbought and there is far too much bullish enthusiasm, in spite that the already thin trading volume grew even thinner during the September trade. Apparently these are signs that the market has hit the ceiling, and is now on its way down again.
What's that? Too much bullish enthusiasm under thin trading volume? That's a new one for the text books.
No, the only way to stay on the right side of the market is to let the market be the guide, as it had fooled the nay-saying cynics during the September trade.
Here, first and foremost the Bull-Trend (NYSEARCA:SPXL), Bear-Trend (NYSEARCA:SPXS) and the large caps (SPX) Troika comes into play. Simply put, for as long as the Bull-Trend keeps the positive configuration of its three MA lines while the Bear's line configuration remains negative as the large caps are following the bull's trend higher, the market remains poised to the upside.
Note this (NYSEARCA:UVXY) VIX Futures ETF and how its MA line configuration is similar to the Troika's Bear. For as long as this is the case, the Bear-Trend keeps digging a deeper hole at the bottom of a deep pit.
But what about commodities? Well,check this (CRB) Commodity Supply index and its twin the (BDI) Baltic Commodity Demand index which have to pull in tandem for the commodity market to kick into a sustained advance. But as reflected by the CRB, while especially the metal commodities have been stock-piling, the Baltic shows that demand for these commodities has been hitting the skids, and that is not the kind of stuff that rallies are made of.
While (NASDAQ:GOLD) appears to be consolidating at a pretty lofty price level, its counter weight the (NYSEARCA:USD) Greenback is slowly gaining strength. But for as long as the three MA lines of this U.S. dollar index remain in their current bearish configuration, the bias for gold is to the upside. But when these configurations turn bullish as they inevitably eventually will, the price of gold will go into a freefall.
The price of oil is being pushed and pulled in two directions. Concerns that escalating Middle East tensions will disrupt oil supplies is keeping this price pressured to the upside. But signs of a slowing economy could reduce demand for oil, while supply remains plentiful, keeps pressure to the downside.
But only when the green Trend-Momentum line rises above the red Base-Support line will oil be vulnerable to the downside.
Against this general backdrop of the market, here is a sample of favored leveraged Bull ETFs: Silver 3x (NASDAQ:USLV), NASDAQ-100 3x (NASDAQ:TQQQ), Nat-Gas 3x (NYSEARCA:UGAZ), Ultra S&P 500 3x (NYSEARCA:UPRO), Tech-Bull 3x (NYSEARCA:TECL) and Ultra DOW 30 3x (NYSEARCA:UDOW). Here are some non-leveraged long ETFs: Home Construction (BATS:ITB), Home Builders (NYSEARCA:XHB), Biotech (NYSEARCA:BBH), Physical Silver (NYSEARCA:SIVR), Grains (NYSEARCA:JJG) and Health Care (NYSEARCA:IYH).
In case the market tanks, here are some leveraged Bear-ETFs: Semis 3x (NYSEARCA:SOXS), NASDAQ-100 3x (NASDAQ:SQQQ), Small Cap Bear 3x (NYSEARCA:TZA), Technology Bear 3x (NYSEARCA:TECS), S&p 500 Bear 3x (SPXS) and Mid Caps 400 3x (NYSEARCA:SMDD).
Here is a sample of non-leveraged short ETFs: EAFE - (NYSEARCA:EFZ), NASDAQ-100 (NYSEARCA:PSQ), Active Bear (NYSEARCA:HDGE), Russell 2000 (NYSEARCA:RWM), Ultra DOW 30 (NYSEARCA:DOG) and Ultra Financials (NYSEARCA:SEF),
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.