Ultra 3X ETF’s beat individual stocks again!

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The table below, like the one I showed in late August, shows me the wisdom of forsaking individual stocks in favor of the 2X or 3X ETF”s.   Why try to find the few stocks that can beat these ETF’s when the odds are so low?   Since the current short bounce began September 1, the standard NASADQ 100 index ETF (QQQQ) rose 8%.  3Xcomparison During this same period, the comparable Ultra 2X ETF (QLD) rose 17% and the tech 3x ETH (TYH) rose 21%.   If I had   been trying to pick the specific NASDAQ 100 stock that would outperform these ETF’s,   I would only have had a little better than even chance (57%) of beating the QQQQ.   But only 13% of the NASDAQ 100 stocks beat the QLD and 11% beat the TYH.   So, why search for the low probability winning   stock when I can just buy the Ultra ETF’s?   Furthermore, a single stock can be slammed by bad news, but the ETF’s are less vulnerable to that because they represent an index or   a collection of stocks. The key to trading profits is to play the odds and not to try to look smart by beating them….. Meanwhile, the GMI and GMI-R remain at their maximum

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Signals inconsistent-waiting in cash

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Sometimes my long term and short term indicators do not agree with each other.   This is one of those times.   My short term daily trend indicator for the QQQQ turned down last week while my long term indicators remain up.   So, I went to cash in my short term trading account but stayed long in my more conservative pension mutual fund accounts.   The GMI

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Why search for great stocks when I can buy ultra ETF’s?

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I spend so much time trying to find the right growth stock that will outperform the market.   Now that we have the extreme ultra (3x) ETF’s it may be preferable to trade them.   An ultra ETF is a basket of leveraged stocks or futures that attempts to outperform the relevant index.   Since I like to trade tech stocks, I focus on the NASDAQ 100 index, which escaped some of the carnage last year because it contains no financial stocks.

I could simply buy the QQQQ ETF when I think the market is in an up-trend.   In this way, I do not have to pick individual stocks but am invested in the 100 stocks in the NASDAQ 100 index.   Lately, stocks tend to explode or implode when earnings are announced.   Because the QQQQ represents 100 stocks, there is less impact from individual earnings announcements.   If I want to place a leveraged bet on the QQQQ I can even trade options on that ETF.

Enter the Ultra QQQQ ETF, QLD which attempts to double (2X) the bullish performance of the QQQQ.     While there is no 3X ETF for the QQQQ, there is a bullish tech 3X tech ETF, TYH.   (There are also analogous bearish ETF’s for those betting on a decline in these stocks, which I will not discuss today.)   Keep in mind that since these ultra ETF’s are leveraged securities, they can move more quickly in both directions–up or down.

So, if I am betting on an up-trend I could buy any one of these ETF’s to make money as tech stocks go up.   The table below compares how one would have done by buying each of these ETF’s during the rally that began after 7/14 through 8/21.

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Market in rally mode

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The QQQQ remains in a nice up-trend and I am long stocks.   We are in the period when few pundits believe the rally is justified.   That is okay with me.   I just ride the train as it goes in the right direction,   until it turns.   Two stocks I have been riding, PEGA and SXCI, have had nice break-outs. However, I still prefer to concentrate in the ultra QQQQ ETF, QLD.  

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