#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)

#SwingTrading – the top stocks on the nifty-50 list

Just revised and sorted the stocks on my nifty-50-stock list – a powerful group they are!

I’m just going to feature the top 12 here because they are just too many moving too much. On the charts below the keys are the white flags on the lower right and lower left of each chart. On the lower right are the closed gains based on the 10 swing trades so far year-to-date and on the lower left are current open trade results using the short-term breadth signal as the trigger for the buys and sells.

Each trade is a $100K stock buy (so the cash in the flag is also the percentage return). For instance, QNST on the upper left of the chart panel is up 55.6% on trades marked up this year and the current open trade is up another 5.4%. VCEL, just below QNST on the chart panel, is up 66.5% on closed trades and down 2.1% on the open trade. And so on, and so on across the charts…

The stock trading here is entirely a market-timed swing system based on the basic idea that most stocks move with the movements of the general market. It is purely technical and what each company does is largely irrelevant. The measure of each stock is how well it tracks and how big it moves in accordance with each market swing.

Needless to say these and many more stocks are doing very well as the bull market so far continues.

(click on the charts for a larger view)

#MarketTiming – Can the bounce become a rally?

The pause in the market suggested for this week in last Friday’s post has played out with not a lot of fanfare. It’s been a more sideways than down (see the SPX chart below).

(click on the chart for a larger view)

That is a 7-day 10-minute chart that ends each day with a volume spike on a fast drop into the close. Overall that is not good. But it could be argued that it is still a digestion of the rapid rise that preceded this week and was one of the quickest bounces off a hard decline in this bull market.

If so, time may still be on the bull side.

The Nasdaq Composite had less of a pull back than the SPX but still marked at today’s close four days down in a row. Four days down is often the time for another surge up, and often times during this bull market it is the time the bounce become a rally with an attempt at new highs. In addition, short-term breadth turned up again, taking long-term breadth with it, both very positive signs and they have a lot of room to move up (see the SPY/Market chart below).

In other words, I’m expecting the market to shoot up Friday.

But…as Trader Vic Sperandeo has fondly said: “If the market doesn’t do what it’s expected to do, it will do the opposite twice as much.” So day traders be nimble, swing traders tighten stops, and investors watch your asses — this is not a spot you want to be blindly holding if expectations go awry.



PRICE: Sell. (Day 4).
VOLATILITY: Buy, (Day 2).


SPY CLOSE – 270.40
QQQ CLOSE – 164.80
CNN MONEY’S FEAR AND GREED INDEX: 15, falling, extreme fear level).
NIFTY-50 STOCK LIST: 16 Buys; 6 Overbought, 3 Oversold, 3 new buys today, 12 new sells.

(click on the chart for a 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)

#IPOs – $FIT shows the first day’s range is sacrosanct

As has been stated in a previous post here, buying into an IPO is actually one of the easiest decisions in stock investing but never let a broker con you into doing it the day of the offering.

Instead, note the high price and the low price on the first IPO is traded. Those are the lines in the sand or the Darvas box around the first day of trading (see the charts below). The time to buy, invest, is on a close above the high of the first day with a stop loss below the high of the first day. That is usually a low-risk trade since the real good news comes when the stock proves it can move up from all the hype surrounding the offering itself and if it falls back the stop to exit is close by.

So, with history on our side, let’s take a look back at one of the most famous IPOs of past couple of years – FIT.

FIT came public in 2105 at 30.40 and had a high on its first day of 31.90, a low of 29.50 and a close of 29.68. That would make the “sacrosanct” range from the 31.90 high to the 29.50 low (see the blue rectangle on the chart below).

The next day, FIT closed at 32.50. That was the buy signal as it finished outside the first day’s range. It then rallied as high at 51.90, a pretty nice rise in a couple of months.

I’m not one for fundamentals but how far did anyone think the company was going to go on a gadget product keyed to New Year’s resolutions and open to competition from virtually everybody?

Needless to say, like New Year’s resolutions themselves, the stock began to fade and by the end of the year 2015 it was violating its “sacrosanct” first day’s range. It started 2016 with a serious break to the downside on substantial volume making it a clear short in IPO trading and, as they say, the rest is history.

It has now dropped into the $5 range from its IPO low of $29.50 in the face of one of the greatest bull market’s in history.

This price action, long or short, is the same with every IPO.

By the way, history, me thinks, is the best market indicator of all.

(click on the chart for a larger view)

$SPY $QQQ – finally a gap and fall that’s worth some money

The general market gaped up today, ran higher, quietly rolled over, then roared down into the close.

It was the quiet at the highs of the day that was a bit eerie. VIX was up (as it has been for the two previous days) and that’s not supposed to happen as the indexes advance. The NYSE advance/decline line was almost immediately below its open. The SPX tagged 2800, the Dow ran through 26,000, and then everything just stopped and reversed. At first, it was almost as if Coyote from the Roadrunner cartoons had again run off his cliff and had yet to plummet to the valley floor below and then like a car that runs out of fuel going up a steep hill.

In the end the day felt like SPX 2800 and DOW 26,000 could be nice round numbers to leave behind.

If one looks at the close in comparison to yesterday’s close it appears as if nothing much happened today. But the close today is deceptive. The close does not quite register the initial leap and the final fall.

And it was a fall worth something. On my $10K weekly options model, the intraday sell signal on the in-the-money QQQ 166 put raced up to a peak gain of 167% and finished the day up 127%; the SPY in-the-money 280 put peaked at 94% and finished the day up 51% (see the white flags on the lower right of the charts below).

If there more downside to come?

Over and over again, this bull market has said no and charged ahead after every little downside glitch. It will continue to do so until it doesn’t. After today’s reversal from higher highs, long-term breadth turned negative making all of the sells on my swing signals shorts (see table below). If today turns out to be the time the bull does not charge higher, well then…it will be a bull that dies with a sigh instead of a snort.



PRICE: Sell. (Day 1).
VOLATILITY: Sell, (Day 3).


SPY CLOSE – 276.97
QQQ CLOSE – 164.02
CNN MONEY’S FEAR AND GREED INDEX: 75, falling, extreme greed level).
NIFTY-50 STOCK LIST: 23 Buys; 18 Overbought, 7 Oversold, 0 new buys today, 9 new sells.

(click on the charts for a larger view)

$SPY – Sideways to down?

After four days up in a row most of the major indexes are due for a pause.

The market is overbought almost across the board. In my nifty-50 stock list, 29 of the stocks are overbought (that is a lot), of the nine 3x-leveraged ETFs I follow eight are overbought.

Given how much bullish momentum is in the market it is most likely it will be a sideways move, and if down, not down much (see chart of SPY below).



PRICE: Buy. (Day 4).
VOLATILITY: Sell, (Day 2).


SPY CLOSE – 273.42
QQQ CLOSE – 160.92
CNN MONEY’S FEAR AND GREED INDEX: 75, rising, greed level).
NIFTY-50 STOCK LIST: 34 Buys; 29 Overbought, 4 Oversold, 6 new buys today, 3 new sells.

(click on this SPY chart for a larger view)

$SPY $QQQ – day trading weekly options, again up 100%

After the Nasdaq’s big up day to start the new year, all of my swing signal clicked again to buys.

See signals table below.

But the question for discussion today is what those swing signals mean for the day trades in what I’ve been calling the “Fool’s Game”, the practice of going long – LONG – calls and puts each day.

Today, with all swing signals in place, and intraday 10-minute signals on SPY and QQQ also on buys at the end of Tuesday, the buys for the day trade today were on the open.

From that point, a day-trading options player in this game wants nothing more than to not be stopped out any time during the day and to close the trade at the end of the day making money. If it turns out it is a strong trending day, like yesterday to the upside with the QQQ calls, then the day trade becomes a big, sometimes very big winner.

The initial stop loss would have been 10 minutes of risk. If the first bar of the day closed below the day’s open, the position would be sold, no doubt for a loss, and possibly reversed depending on its relation to the moving average. If the option finished above the open, it would be in profit and a stop-loss just below the open could be placed to make it virtually a free trade.

So how is this game going today?

The buy on the open in the weekly SPY and QQQ in the money calls have gone straight up so far for the day with the SPY 268 weekly call up approximately 80% at the moment, and QQQ weekly calls up about 118% (see the chart for an illustration of all of the above).

A 100% day trade…can’t ask for much more than that, but as always in trading it is take what you can get.



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


SPY CLOSE – 268.77
QQQ CLOSE – 158.49
CNN MONEY’S FEAR AND GREED INDEX: (62, rising, greed level).
NIFTY-50 STOCK LIST: 30 Buys; 18 Overbought, 0 Oversold, 17 new buys today, 5 new sells.

(click on the chart for a larger view)

#Stocks – Bellwethers kick off new year with a bang

All but one of my bellwether stocks have started the year so far with solid percentage gains.

Only GS lags, up at the moment only 25% on the day. The leaders include BABA up 5%, NFLX up 4.6% and FSLR up 3.5%.

For the rest see the charts below:

(click on charts for a larger view)

$GE – on the watch for January bounce…rally?

Call is bottom picking as the tax-selling season ends – GE look like a prime candidate for a bounce.

Although depressed all year and in some kind of fundamental trouble (not my concern), GE remains a big name and, technically speaking, it has tested its recent lows and so far is surviving the test.


It’s probably worth a gamble, with the recent lows as a stop loss. This is a play I want to go my way right away or I’m going away.

For a quick, cheap scalp, at the moment, the Jan 17 call, which gave a buy signal today at 64 cents (see the 10-minute chart on the right of the chart panel below) is at 68-cent ask with the stock at $17.46. For what it’s worth that is in-the-money option. A bounce is going to make some money, and a rally is likely to make a decent profit.

Ignoring the chart, the better buy may be at the end of the day for the option play, and next year’s open for the stock itself.

(click on the chart for a larger view)