Why search for individual stocks when we can ride the ultra ETF’s?

GMI4/6
GMI-R8/10
T210886%

It is rare that I complete an analysis whose findings totally surprise me, but take a look at this one.   A lot of the pundits claim that the ultra ETF’s,   leveraged baskets of stocks that try to double or triple the performance of their underlying indexes or sectors, fail to achieve their goals.   So, just to satisfy my curiosity, I compared the performance of the primary index ETF’s, SPY (S&P500) , DIA (Dow 30)   and QQQQ (Nasdaq 100) with those of the leveraged ETF’s.   There were exact comparisons for these indexes for   the 2X ETF’s, but I had to choose other, more general   indexes for the 3X ETF’s. The results blew me away…

The 2X and 3X Ultra ETF’s absolutely outperformed the standard index ETF’s in the period since the March bottom.   For example, while the QQQQ (Nasdax 100) index ETF rose 42.9% in this period, the QLD (2x QQQQ ETF) rose 99.2% and the TYH (technology bull 3X ETF) rose 179.4%.   In comparison, the top five individual stock performers in the Nasdaq 100 stocks rose from 138.8% (JAVA) to 180.57% ( STX).   In fact, only 16 stocks (16%) in the Nasdaq100 (and 23% in the S&P500) rose 80% or more.   So, the choice before us is to   search for the needle in the ultraetfperohaystack individual stock that might do really well in a bull rise, or to buy one of these 2X or 3X ultra long ETF’s and ride a basket of stocks with a lot more diversification and probably less risk than owning individual stocks.   The key is to discern the trend accurately and to then ride the ultra ETF with the most potential for following that trend.   Some ultra ETF’s also trade options…..

Read moreWhy search for individual stocks when we can ride the ultra ETF’s?

Rally gaining strength; Guppy chart reveals major turn

GMI4/6
GMI-R8/10
T210882%

If calling the short term trend of the market were easy, we would all be rich and retired.   Last week, my short term QQQQ indicator gave me a head fake and turned my daily trend count down.   That new downtrend lasted for two days and then the up-trend resumed.   However, I had indicated at the time that my short and long term QQQQ indicators were giving inconsistent readings, with the long term indicator remaining in an up-trend.   The new short term up-trend just completed its 3rd day.

The more that I analyze the market, the more I become convinced that I should rely on the longer term weekly trends to determine the market trend (see discussion of the Guppy chart below).   The QQQQ has been above its critical 10 week average for 11 weeks and the SPY for 10 weeks. But I have told you that I am a chicken, and would rather go to cash at the first sign of weakness and re-enter the market later, after the dust has cleared.   I actually have other, personal reasons, for why I am unwilling to enter the market right now.   I cannot trade successfully when I am stressed by other concerns. The only stock I own is ASIA, with a close stop loss.  

Read moreRally gaining strength; Guppy chart reveals major turn

New QQQQ short term down-trend begins; buying QID

GMI3/6
GMI-R5/10
T210877%

I am very cautious about the current market.   I believe that we have entered a new QQQQ short term down-trend.   On Friday there were just 11 new highs and four new lows in my universe of 4,000 stocks.   In addition, a number of leaders have broken down, including AIPC, QSII, ALGT and NFLX.   When rally leaders falter, it often is an ominous sign of things to come.

With the GMI now at 3, I am becoming more defensive.   I am getting out of QLD and will buy some QID (ultra short QQQQ ETF).   If this down-trend continues, I will make money in QID as the QQQQ declines.   I am concerned that only 20% of the QQQQ (NASDAQ 100) stocks had a MACD close Friday above its signal line.   The perplexing thing about this market is that my longer term weekly QQQQ trend indicator remains positive.   But any long term decline must, by definition, begin with the short term indicators declining. So, this may be a contained decline withing a longer term up-trend.   The key is to be cautious and wait for the market trend to reveal itself.   I remain mainly in cash.

Read moreNew QQQQ short term down-trend begins; buying QID

Market up-trend in doubt; mainly in cash

GMI4/6
GMI-R5/10
T210879%

The QQQQ is resting right on support. A decline on Monday would signal to me the beginning of   a new short term down-trend. There were only 7 new highs and 8 new lows in my universe of 4,000 stocks on Friday.   GOLD broke to an all-time high last week and GLD, the gold ETF,   closed back above its 10 week average. This is an ominous sign, with the dollar in a down-trend.   Buying stocks at new highs may not be a good idea now. Friday was the 42nd day of the current QQQQ short term up-trend. The Worden T2108 is now down to 79%.   And most troubling, only 24% of the Nasdaq 100 stocks have a MACD above their signal line.

A lot of my cash secured puts expired on Friday.   I am going to wait to take on new positions in June options around June 1.   Better to be defensive now and not give back all of the profits made since the March bounce. I am mainly in cash again.

gmi0515

QQQQ Up-trend completes 37th day; IBD New America stocks at new highs; ASIA; most of my sold put options expire worthless on Friday

GMI4/6
GMI-R8/10
T210892%

The QQQQ completed the 37th day of its up-trend on Friday.   However, there were only 16 new highs and 5 new lows in my universe of 4,000 stocks on Friday.   Five of the 16 were on my IBD100 lists:   VNUS, GMCR, HANS, LINC and INT.   All of these 5 but   VNUS were also on the IBD New America page at some time this year.   I keep a watchlist of New America stocks to look for possible winners.   New America stocks are companies that IBD staff think have innovative products and exciting businesses.

Both Nicolas Darvas and IBD’s William O’Neil have written that winning growth stocks tend to have great stories behind them.   Most of the New America stocks eventually make it onto the IBD100 stocks lists.   So it is worth watching these stocks.   INT was on the New America list last February around $31 and closed on Friday at $41.90.   And HANS was written about last January around $34 and closed Friday at $42.55.   So, stocks on the New America list often take off sometime after their story is published in IBD.   One recent addition to the New America list that looks promising technically to me if it can break $18.60, is ASIA.  

Read moreQQQQ Up-trend completes 37th day; IBD New America stocks at new highs; ASIA; most of my sold put options expire worthless on Friday