58th day of $QQQ short term up-trend; New Year’s Resolution–trade only leveraged ETFs

GMI6/6
GMI-25/8
T210858%

2013 was a strong up year for the market.   I though it interesting to make a comparison of how select ETF’s performed if one held them in 2013 and each of the two prior years. The results were illuminating for me.   As this table shows, in 2013   ETFannualperf4 leveraged ETF’s far surpassed the performance of the SPY (S&P500 ETF).   While SPY rose about +30% and the QQQ (Nasdaq 100 ETF) rose +35%, the other leveraged ETFs in the table rose from +82% (QLD) to +161% (CURE).   Are we content to only do better than the SPY or QQQ? Note also that three of the four ETF’s in the table that rose over 100% in 2013 were up 50% or more in 2012. The   ETF   that is strong in   one year may also be strong the following year!

In an up-trending market, the leveraged (bullish) ETF’s are clearly the way to go!   Why am I spending all of this time and effort to uncover the rare individual stock that can do better than these leveraged ETFs?   Is it the challenge of the game? Is it the hope of appearing smart by finding the few stocks that rocket higher?   Is it an addiction to frequent trading? All of the above are terrible reasons to be in the market.

Individual stocks are prone to news and earnings based volatility. In contrast, an ETF provides some protection from event volatility because it represents a basket of stocks.   One stock’s sudden decline could be attenuated by the other stocks in that ETF.   One might even dispense with attending to the fundamentals for an ETF.   All one needs to do is to gradually accumulate a leveraged ETF that is in a confirmed up-trend and to exit gradually as the up-trend ends. (I say gradually, because it takes time for a trend to change and I like to place my bets as the trend develops and   I become more confident of the new trend.) My New Year’s Resolution for 2014:   to trade mainly the leveraged index ETF’s…….

The GMI remains at 6 (of 6).   The GMI-2 has weakened a little to 5 (of 8), with its most sensitive short term components turning negative.

GMI01032014

 

8 thoughts on “58th day of $QQQ short term up-trend; New Year’s Resolution–trade only leveraged ETFs”

  1. One obvious guess as to why traders trade stocks rather than ETFs or leveraged EFTs… greed? The notion that one might hit the jackpot by purchasing a stock like Apple that increased much more than even a leveraged ETF?

    Using your GMI indicator can be very useful with making a less emotional determination of general market direction.

    Picking a leveraged ETF that is going to trend 100+ percent would continue to be a real challenge.

    You provided a well reasoned analysis and a good suggestion, excellent work.

    Best of luck in 2014.

    Michael

  2. I like your analysis and webpage. Appreciate your comments and data tracking very much. Thank you.

    Regarding your alternative ETF selections – how do you identify the upturn in these categories? Such as CURE?

    Jim

  3. Diversification becomes the challenging point of managing risk for a portfolio that is higher in dollar value. Say one has a $100,000 to invest in the market. Maybe only buy one or two leveraged ETFs. Does one simply buy a double or triple leveraged ETF for each sector? Systemic versus non-systemic risk is a benefit of trading an ETF. Remember Enron was Non-systemic risk (remember – Enron Non), meaning individual risk of company specific news not market wide bad news such as the entire market collapse in 2008. All of the points mentioned above in the blog are valid “personal demons” that one must personally address on an individual level in order to improve trading prowess. Personally, I am spending more time reviewing Dr. Wish’s trading leveraged ETF strategies. I also have been investing in triple leveraged ETFs since Dr. Wish starting writing about these investment vehicles some time ago. I do however feel it is best for me personally to diversify through more than one or two holdings. Trading “green line breakouts” can also be profitable to the portfolio.
    Dr. Wish, thank you for your continued dedication in sharing your knowledge on trading the market.

  4. Dr. Wish, I have been following your posts for about a month or so. Aside from the TC2000 webinar, can you recommend any particular posts you have written that outline the specifics determining your buys and sells in the gradual entries and exits of leveraged ETFs you speak of? Does your New Years Resolution regarding leveraged ETFs apply to your long term account as we’ll or only your short-term trading account?

    Before finding your website, the media/financial “experts”, etc had pretty much scared me away from holding leveraged ETFs any longer than a day. Since I am not a day trader, I turned away from these trading vehicles. Thanks for sharing your experiences. I will definitely begin dipping my toes in.

  5. CURE, BIB, SOXL, and TQQQ are ok for small accounts, but for larger accounts leveraged ETFs with better liquidity are preferred, such as SSO and TNA.

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