$TQQQ, FEAR AND GREED — the market bounces and maybe rallies a lot

CNN Money’s “Fear and Greed” Index is at seven, which is a measure of not only extreme fear but of EXTREME FEAR!

In other words, it is at a level that usually stops a market sell-off and reverses to a rally, and given that the Nasdaq Comp is down five days in a row (another number that often produces an instant bounce), that is a rally that probably comes Tuesday.

Remember when there was a time when Tuesdays were called “Turnaround Tuesdays”? Very possible that time will come around again tomorrow.

Below is a chart of TQQQ, the 3xLeveraged ETF for the Nasdaq.

Take note, the last time the Fear and Greed Index turned up from this level TQQQ rallied from 103 to a high of 127, a twenty-three percent move in seven days.  That is what is meant by “a lot” in the headline above.

There’s not much more to say except to point out that fear has not yet abated (the index can go lower has yet to turn up) and from a trading point of view one would like to see lower on the open tomorrow to buy and take the gamble that it turns by the end of the day.  And it needs to be noted that with this quick a fall in the market there is likely to be a retest of the lows after an initial bounce before any rally gets going in earnest.

Regardless, this remains a play made at one’s own risk and like anything in the stock market there is no guarantee of anything.

(Click on chart for a larger view)


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