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Showing posts from February, 2007

QID - Shelter from the Storm

Tuesday was pretty tough in the markets, worldwide. One bright spot, however, could be found among the inverse ETFs that track the major indexes but perform in the reverse fashion.

This blog recently recommended the ProShares UltraShort QQQ (QID) as its February Pick o' the Month (read the full post). This ETF aims to go up twice as fast as the NASDAQ 100 goes down and vice versa. Lately this trade was going against us as the NASDAQ moved to a new 6-year high and QID dropped accordingly. I was seriously considering throwing in the towel. Then today QID moved up over 9% and provided some small consolation while the rest of my portfolio tanked.

For the post where I initially discussed the use of leveraged long/short ETFs to profit in bear markets, click here.

Weekly Market Update - Minor Decline

Weekly Market CallNot much news this week and what there was was not particularly positive. As a result, the Dow and the S&P took a bit of a breather while the NASDAQ decided to perk up and hit a new 6-year high. The Russell 2000 also tacked on another one percent this week and now leads all the major indexes with a year-to-date gain of 4.9%

Probably the biggest news of the week was that the core CPI for January was up 0.3%. This was the largest gain since June but did not do much to ignite fears of inflation and the market largely shrugged it off.In other news, commodity prices continued firming and oil pushed above $61 per barrel. Once again, the market shrugged it off. A few large caps reported earnings and it was a non-event. Fed policy committee meeting minutes were released on Wednesday. They were a bit more bearish in tone than Bernanke's recent remarks but appeared to have little effect on the market.ETF CommentsIndexes - If you are watching the ETFs that track the majo…

The Trouble with Trend Reversal Indicators

Many of us use various trend reversal indicators to time our trades. Our desire is to determine when prices have changed direction so that we can ride the new trend. Why doesn't it always work out?

The first reason, of course, is that unforeseen events often drive prices in unexpected directions. That is something we can't change and it often makes all of us technical traders crazy. On the other hand, sometimes an unforeseen event is a prelude to a new trend. A stock spikes up on a what seems to be a one-time piece of good fortune and soon falls back. Does it start making its way back up or does it resume a previous down trend?

The conflict within trend reversal indicators is that, though they can definitely tell when prices change direction, they suffer from two problems. One, they often can't determine how significant that move in prices actually will be. Two, they are often lagging indicators. As such, they can be late in providing a signal, sometimes leading the investor…

Weekly Market Update - Bernanke Speaks

Weekly Market CallFederal Reserve Chairman Bernanke testified before Congress this week and his outlook was not as grim as some the Fed members who had spoken earlier this week. The market took his more benign tone as a cue to rally. The NASDAQ turned in a good performance but, unlike the Dow and the S&P 500, did not make a new high.

Economic results this week were not particularly noteworthy and, in any case, provided a mixed view of where we are going. There is still nothing to dispute the view that earnings growth is slowing. Commodity prices have firmed lately (oil is up just shy of $60 a barrel again) and interest rates are essentially flat with no expectation of a rate cut anytime soon.

The feeling is that the markets have no reason to be rallying but they are anyway. It appears that the advance/decline ratio has been shaky since December which indicates there are pockets of strength and the rest of the market is just muddling along. The NASDAQ, in spite of moving higher again…

Expanded Daily News Pages

Back in December I added a feature to the site called The Daily News, a mash-up of financial news, opinion, analysis and commentary from around the web. I have expanded it now to two pages in order to provide even more sources of market updates, financial discussion and investing ideas.

The new lineup of content is as follows:
Seeking AlphaTicker SenseBusiness & Finance from Digg.com ETF TrendsDigStock.comSchaeffer's Daily Market RecapMarket Calendars from MSN-Money and MarketWatch
Schaeffer's Daily Market BlogFinancial blog posts from TailrankYahoo Business NewsMotley Fool HeadlinesMarketWatch.com - Stocks to WatchWall Street Journal - EarningsTwo from SmartMoney - Top Stories and Sector PatrolInvestors Blog Network (of which I am a member)
Read the Daily News and be prepared for your trading day. All the news and analysis in one place!

Weekly Market Update - Uncertainty turning to Bearishness?

Weekly Market CallAll the major indexes moved nicely higher this week until Friday when things got ugly. Cisco reporting good earnings and providing positive guidance gave the market a lift on Thursday but it wasn't enough to carry through to the end of the week. I am reminded of when Apple announced the iPhone and the NASDAQ hit a new high, only to fall back soon after. As I said then, it seemed unlikely the market as a whole could rise on the back of a phone or on the results of just one stock.

So what precipitated Friday's swoon? Three Fed officials did say that though they expect inflation to moderate later in the year, the risk of higher inflation remains. The Dallas Fed president even indicated there was a potential for further rate hikes. Not a message the market wants to hear.

Earnings season is about over now. A number of large-caps reported good earnings this week including the aforementioned Cisco as well as Prudential, Disney, Marriott and News Corp. The bad news is …

Tips for TradeRadar Users

First, I would like to thank all of you who have downloaded the TradeRadar software. As you have probably discovered, it is quite different than many typical stock market indicators and takes some getting used to. I would like to offer some tips and tricks that I have accumulated from my experience using the software.

Keep up to date on the releases - I have added a number of features that make it easier to use and I recently fixed a bug in the Signal Strength calculation for SELL signals. Full installs and upgrades are available on the Download page.

Interpreting the indicators on the Buy-Sell Indicators screen - the Dashboard is intended to help evaluate how good the BUY or SELL signal is by using a red/yellow/green scheme to provide a quick determination at a glance. This is a ballpark estimation. You may not agree with the color indicated. For example, a Signal Strength of 55% may be good enough for you but TradeRadar characterizes that as yellow (caution). That's OK if you can …

Weekly Market Update - Mostly More of the Same

Weekly Market Call Earnings continued this week as they did last week: decent numbers coupled with down-beat outlooks for coming quarters. Over 60% of the S&P 500 have reported by now so we can say we know the tone of this quarter's earnings season: so-so though it looks like aggregate earnings might just barely cross into double digits. Other events of interest included a rise in oil prices and the Fed Open Market Committee meeting. The closely watched Fed statement was essentially the same as the last one and, as expected, they held rates steady.

Economic news was mixed with fourth quarter GDP being revised upwards to 3.5% and January employment data caming in lower than expected. This last was offset by an upward revision for December. Reported wage gains were modest, thus providing a case for lower inflation. Economically speaking, it appears that we are on track for a soft landing with growth continuing amid modest inflation. Based on earnings season, however, a contrarion…

Pick o' the Month - QID

Ok, I finally sold my last few shares of SanDisk (SNDK). Having posted a list of bottom-fishing candidates for this month's pick a few days ago, I expected to choose one of them as the Pick o' the Month and immediately put the money to work.

As I mentioned in my post yesterday, however, I have fixed a bug in the Signal Strength calculation for SELL signals in the TradeRadar software. The new version gives the same SELL signal (click here to view full size) on the QQQQ but now it looks strong enough to give me the confidence to act upon it. QQQQ sell signal. As a result, I turned around and purchased the ProShares UltraShort QQQ (QID). The "Ultra" classification means they are trying to achieve twice the daily performance of the associated index; in this case, the NASDAQ 100. So if the QQQQ is going to go down, QID should start moving up and moving up smartly.

I have been considering doing this for a while, at least since mid-December when TradeRadar first started givi…