#SwingTrading – 3x Leverage for the short-term swings

If one is a swing trader in ETFs 3x-Leverage is the name of the game.

For example, the currently short-term breadth indicator I follow gave a swing buy signal last Thursday for Friday’s open and the market exploded to the upside Friday. While the Dow and the SPX stalled out today, the Nasdaq put on another up day, actually the seventh in a row. The same short-term breadth signal that gave the buy for Friday morning has now given a sell for tomorrow’s open.

I will not be surprised if tomorrow the entire market takes a dip, likely just a dip, not a tumble.

The sells on the ETFs are on tomorrow’s open but, in the face of today’s heads-up on the sell signal, let’s take a look at how the leveraged ETFs done and why they are the name of the game in short-term index and sector ETF trading.

Take a look at the charts below. The white flags on the lower left are the gains on the swings so far this year (longs only) and the white flags on the lower right are the current gains. Both numbers are calculated on buying $100k on each trade in order to not only give a dollar amount but also to correlate with the percentage gain.

We’re talking a mere two-day bullish trade, and TQQQ (the Nasdaq) is leading the indexes, up 5%, while SOXL (semiconductors), up 7.6%, among the sector ETFs, leads TECL (tech) up 4.5% and LABU (biotechs) up 4.3%.

Two days. Not a bad trade if one chose to close on the close today. Regardless, because of the signal, they all will be cashed in on the open tomorrow.

Consider for a moment the three charts in the column on the right of the panel. The top two are 3x-leveraged financial ETFs — FAS (big banks) and DPST (regional banks) – and the one in the lower right corner, NAIL, is a 3x-leveraged EFT for home building stocks. NAIL, down year-to-date, had a nice move on this swing, up 6.7%, but note where it is in relation to the two financial ETFs above… This is housing lagging the banks, particularly the regional-bank stocks.

I bring this up because of history — the action in those sectors looks a lot like, almost identical in fact, to how they looked in 2007.

With that I leave this post. As far as swing trading goes, will be in cash tomorrow.

(click on the chart for a larger view)

#MarketTiming – long, strong and more to come

Didn’t getting around to posting the timing signals last week for various personal reasons so this post probably looks a little late to the party.

Oh, well…

A lot related to the headline above has already happened. The Nasdaq is already up six days in a row and the SPY, except for a minor dip during the week, would be too. My nifty-50 stocks have risen from 13 on buys and 15 oversold six trading days ago to 41 on buys and 29 overbought as of the close Friday. Virtually every index and sector ETF is overbought.

Once again, the market internals, ruled by short-term and long-term breadth, called the swing low, the turn, and the rally (see the circles and lines on the chart below).

So why bring this up now?

Because there is more to come in this bull market, either right away or right after a shallow pullback. The short-term breadth indicator is just too strong to be turned on a dime, and with the long-term breadth having just come out of a divergence itself (see the circle in the middle of the chart), there is a good chance this rally has another three, four, or more weeks to run before any significant sell-off is possible. So every dip is to be bought, and every surge savored.

Could it be different this time? The market could do whatever it wants but history says not right now, and history, when it comes to the mass psychology and movements of the market, is the best indicator of all (no matter who says otherwise).

(click on the chart for larger view)

#MarketTiming – What a “long” glorious week!

This is an update of this post in this link, made last weekend:

#MarketTiming – Time for a bounce…

Wow! The predicted “bounce” has turned out to have been an understatement to what happened in the market this week.

Remember the 1961 movie “The Absent-Minded Professor” with Fred MacMurray, which introduced the world to flubber? Well, this week was a FLUBBER OF A BOUNCE, and since today it turned long-term breadth positive it is a bounce that has likely turned into a rally.

If I had to guess, instead of just following along, I suspect the pause begins tomorrow. If it gaps up, the rest of the day will likely be flat as the monthly options expiration plays out. If it gaps down or opens flat, there’s a good chance it rises again to the close and starts the pause there.

Just guessing this stuff…

Regardless, it has been a truly glorious week for swing traders – among the leveraged index ETFs TQQQ is up 15.8%, TNA up 12.1%, UPRO up 10.7%, even SVXY in the blistered VIX complex is up 15.3%. The at-the-money monthly SPY 263 call from Monday’s open, expiring tomorrow, is up 179%. Among the bellwether stocks AAPL is up 9.2% (that is a heavy market-cap lift in an awfully short time), BIDU up 13%, NFLX up 11.2%. I’m going to update my bellwether stocks later but suffice it to say here all twelve as of the close today are in the black for the week.

Now for a few cautionary notes.

If there is any trouble with this, it is that it has been a straight up move since last Friday. All the major indexes and most of the sector ETFs are up five days in a row. Much of the market is wildly overbought on short-term basis. This up move has been crazy. It is easily three standard deviations of an average advance and done in five consecutive days! (See the histogram on the Nasdaq Composite chart below.) I can’t even remember the last time anything like that happened, and obviously not in the last six months of this huge bull market. Forty-seven of the stocks on my nifty-50 stock list are on buys with 31 overbought (see the swing trading signals below), and yet we are not at new highs. This is going to have to have a pause, some backing and filling, then a resumption of the upswing before one can be sure it is yet another bullish rally in the on-going bull market.

The trouble with rallies out of hard drops, like the one the market took before this bounce, is that by the time they are obvious, they are sometimes over.

In addition, if the fierce sell-off that has preceded this bounce was a shot across the bow of the bull market, it is possible the buying this week is the last leap into the market by those long-ago left behind — if so, and if this rally fizzles before new highs (or even at marginal new highs) then this could be an advance before a mighty, mighty big flop.

Whenever this ends, we are going to have one of the biggest bear markets in history. If you don’t think so, you must not know history or you think “it’s different this time.” History says it is never different this time.

Even flubber bounces had to come back to earth.



PRICE: Buy. (Day 5).
VOLATILITY: Buy, (Day 5).


SPY CLOSE – 273.03
QQQ CLOSE – 165.70
CNN MONEY’S FEAR AND GREED INDEX: 11, falling, extreme fear level).
NIFTY-50 STOCK LIST: 47 Buys; 31 Overbought, 0 Oversold, 1 new buys today, 1 new sells.

(click on the chart for a larger view)

#MarketTiming – Time for a bounce…

Just spent a week in New Orleans watching Carnival parades, eating too much food and listening to lots of great music.

So what did I miss in the markets?

Just kidding. Saw all that too. Long time coming but again, just as everyone started to believe it was, it is NOT DIFFERENT THIS TIME.

The question to be answered is was that just a correction after a great bull run or is that the first plunge from a new bear born? Probably the bear is being born but we’ll have to see if it is so in the fullness of time.

For now, after Friday’s further plunged to another new low and reversal back into positive territory, it’s likely the market will bounce this week. How high and for how many days is anyone’s guess but a bounce is what to look for, and, as they say, if one sees what one is looking for, jump all over it.

An important note, the lows and tests of lows last week set up a divergence with short-breadth (see the green circle in the upper section of the chart below). That is an aggressive trader’s buy signal. Works like a charm in bull markets. Doesn’t work all the time in bears. What happens next on that indicator could tell a lot about what kind of market we’re going to have going forward.

All swing signals registered buys Friday but the long-term breadth remains negative indicating so far this bounce will only be a bounce.



PRICE: Buy. (Day 1).
VOLATILITY: Buy, (Day 1).


SPY CLOSE – 261.50
QQQ CLOSE – 156.10
CNN MONEY’S FEAR AND GREED INDEX: 10, rising, extreme fear level).
NIFTY-50 STOCK LIST: 19 Buys; 2 Overbought, 29 Oversold, 9 new buys today, 6 new sells.

(click on the chart for a larger view)

$SPY #Options on a roller coaster for a losing day trade

Today’s price action in the SPY was truly a day on a roller coaster. Consequently it was the same for the weekly calls and puts.

First, a gap up, then a plunge on the ETF (see the chart on the left below), another bounce into mid-day, and another plunge before a final surge into the close.

The SPY triggered a day trading buy on the calls, which stopped out for a loss 27% loss, $2688 on 10K traded, before reversing to the puts which saw a loss of $602 at the close (see the white flags on the lower right of the charts below, in-the-money calls on the left, puts on the right). That made the total loss for the day almost 33% per 10K traded, a draw down of approximately $3290, the fourth losing day in the past 20 trading days.

However, there were plenty of times defense could have been played during the day. This is day trading after all.

When the call failed to hold its open at 1.79 it could have been stopped out for less of a loss than when the system signal finally sold (the chart below on the left). On the reversal the put trade made up all of the loss on the call and about 11% more at its high (the yellow-coded spike into the last hour on the chart on the right). Selling that gain would have been a gift for the day but even coming down from that high on the puts, there was a breakeven (the end of the first cyan-coded bar)

Defense. Always take the signals, then play defense…

(click on the charts for a larger view)

$SPY #Options – #DayTrading 10K in weekly puts…FINAL UP 55%

Trading weekly 286 puts – 64 contracts at $1.49 – to start the day trade.

Current return per $10K in the white flag on the lower right of the chart below.

Will update.

Update #1 – stop at breakeven.

Update #2 – the trade topped out at up 39% (the green vertical line on the updated chart below). Violated its rising moving average at up 15% (the first red vertical line), a point at which to take some or all off for the day.

Stopped out at break even (the second red vertical line).

Obviously a disappointing day-trade in the put. Just as obvious it is the trades that do not hit the stop loss that make the most money.

Update#3 – Reentry at $1.49 again, $10K, 64 contracts. Stop at breakeven. See updated chart below.

FINAL UPDATE: the last entry in the puts rode the sell off to the close, netting approximately 55%, $5,500 per $10K in the trade. So the disappointing, even with the first stop loss, day in puts turned out to be just fine. See final updated chart below.

TUESDAY UPDATE: Another day trade in puts, triggered off SPY’s gap at the open. A fairly frustrating sideways move after the open. Stopped out on the first entry for a 12.2% loss on $10K in the weekly in-the-money 284 strike, 36 contracts. Reentered the 284 strike, 41 contracts, for a 27% gain into the close, for a total net of 14.8% on the day, $1,480 per $10K in capital. I’ll skip the chart for today.

(click on chart for a larger view)

$SPY $QQQ #Options – Day trading $10K…Final Update


As other bullish week in the bull market begins to draw to a close, the $10K buys in the weekly in-the-money SPY 283 calls and QQQ 168 calls are up 45% and 28% mid-day (see chart below). That is $4500 and $2800 on a $10,000 buy in each index ETF.

Will update on the close.

UPDATE: The week ended with a glorious options trade in the weekly SPY and QQQ options. The SPY 283 call, expiring Friday, was up 130%, $13,300 per $10K traded for the day. The QQQ 186 call, expiring Friday, was up 96%, $9.660 per $10K traded for the day.


(click on the chart for a larger view)

#MarketTiming – a choppy Friday leads to a buy-it Monday

Friday’s market action continued its sideways chop as it consolidated the gain from last Wednesday’s trending day to the upside.

As the 10-minute screenshot for the day shows there was almost no money to be made in the choppy action, and if there were any profits to be taken, they would have had to been taken fast while losses would have been easy to come by on both sides of the market (see the flags on the lower right of each chart below).

However, with both the SPY and QQQ closing above their respective opens and intraday moving averages, as well as all end-of-day swing signals turning bullish again, the initial trade on Monday is to the buy side (see table below) for another possible up swing.

Long-term breadth remains down, but barely (-1) with the threat of another bullish whipsaw. It has been whipsawing daily for the past week.

(Needless to say, this market, in general, remains wildly overbought and can pull back any week, any day, any hour, any minute but that is the way it usually is in raging bull markets.)



PRICE: Buy. (Day 1).
VOLATILITY: Buy, (Day 1).


SPY CLOSE – 280.41
QQQ CLOSE – 166.34
CNN MONEY’S FEAR AND GREED INDEX: 80, rising, extreme greed level).
NIFTY-50 STOCK LIST: 30 Buys; 17 Overbought, 3 Oversold, 10 new buys today, 1 new sells.

(click on the chart for a larger view)

#MarketTiming – Bullish #SwingTrading continues…

The market had its one down day two trading days ago and has, as usual, vaulted higher off the opportunity of buying coming out of that one-day dip.

Quite frankly, except for the money to be made by either buying and holding or trading the long side, I’m getting pretty bored this bull market’s endless advance. I would like to see some pullback. Actually I’d like see a drop that scares the balls off the bragging bulls. That would be amusing.

Possibly we’ll get some pullback with both short term breadth and volatility, of my three swing signals, now on sells, but I’m not counting too much on it – sells are sells only, not shorts, as long as long-term breadth remains positive.

Overall the swing signals continue to be consistently profitable.

Volatility since the beginning of last year has been crushed with the VIX falling below 10 repeatedly. On the swing signals – based on Price, Breadth, and Volatility – the leveraged ETF, XIV, appropriately performed best on its own signal – up 105 percent for the year.

See the chart panel below for XIV on all three signals – the white flags are the returns per $100K place on each swing trade, which also corresponds to percentage gains.

A buy and hold on XIV wildly out performed all of these swing signals, up 159 percent since the beginning of last year (what a year!), but one would have had to have known that a buy-and-hold was going to do that from the beginning. On the other hand, swing trading controlled risk at every turn while also notching remarkably returns.



PRICE: Buy. (Day 2).
VOLATILITY: Sell, (Day 2).


SPY CLOSE – 277.92
QQQ CLOSE – 164.49
CNN MONEY’S FEAR AND GREED INDEX: 79, rising, extreme greed level).
NIFTY-50 STOCK LIST: 32 Buys; 25 Overbought, 4 Oversold, 10 new buys today, 4 new sells.

(click on the chart panel for a larger view)

A flat day in the $SPY options day trade


Had buys signals across the board from Friday so the entry in the SPY options was at the open on a gap that proved to be frustrating by the end of the day.

The weekly in-the-money SPY call (267 strike) on the opening buy instantly surged in the first ten minutes to up 40% (a fast market move), but then came off immediately and ground down steadily all day to the close (see chart below). It was up 6.6% on a $10K buy-in at the close. A profit is a profit, but that 40% back at the open gnaws on the mind all day as to what might have been. Needless to say, there were plenty of opportunities to take a higher profit on one of the intraday bounces but that too can lead to sloppy trading. Up to the individual trader how the day, during the day, is played.

Didn’t quite get with the weekly QQQ calls (157) which were a much better trade today, up 21% at the close on a $10K buy.

(click on the charts for a larger view)