2023-10-27F DOWNTREND Day 6: OUCH! Both major indexes tumbled lower last week…. Nasdaq -2.6% S&P500 -2.5% with higher weekly volume.Yikes!
The major indexes had significant drops for the week both with higher volume.
· Nasdaq dropped 2.6%,
· S&P500 dropped 2.5%.
But the week ended with a difference of opinion between the major indexes
Do you know why the QQQ usually does better than the Nasdaq? The Nasdaq includes all the typically slower-moving financial companies that are not included in the QQQ (100 largest stocks on the Nasdaq.)
Many of you know that I love to hold the Triple QQQ (TQQQ) in a strong uptrending market.And I switch to the short the TQQQ index on the way down. Please note, that chart is theoretical. I do not know the exact top or bottom of any trend until after it happened.
Even if you didn’t get out at the very top price (as I have marked the ideal blue buy & hold period and the rising blue TQQQ and the ideal buy & hold period for the red SQQQ line,) you still could have gotten in and out close to the pivot points and made xxx% total gains (theoretically.)
Would you have had the stomach to hold on the TQQQ when it fell for almost a month and half in Feb-March? If you had gotten out at the March low, you still would have earned
When the market started back up, If you got back in where you sold, you could have then run up to sell after the chart topped …. perhaps at 250, 240 or 230.
Also remember, I do not know how to get in at the start of an Uptrend, or out as the trend tops. But I get closer than most.
We don’t know it’s a top until we have ridden the market down for a while.
But I get closer than most.
If you had gotten IN at the beginning of the year and out at the March low you would have been UP about 20% which alone is a pretty good year. But I hope you would have stayed around and considered getting back in as the TQQQ broke to a new high.
>>>Next question: When to sell the TQQQ a second time? I repeat, I do not know how to get in at the bottom nor out at the time. The question is, How much pain can you stand? And remember, most stocks including ETFs fall faster than they rise. Many traders do not like to play the TQQQ because they are notorious for falling faster than they rise.
I’ll let you ponder those questions. On a MarketSmith chart, you can play out the stock timing drama. You can reveal the chart one day at a time to see how well you would have timed it.
My goals in this discussion is to be sure you know about:
· The importance of timing the market.
· How the inverse ETFs work and
· That you do NOT have to get in at the very bottom and out at the very top to make a great return when the stock or index is really moving.
Interested in consistently better returns? YOU should join me to focus on the TQQQ (triple QQQ) when the market is rising and the SQQQ (short triple QQQ) when the market is following.
It’s important to look deeper than just “what happened this week.”
REMEMBER: A “BUY & HOLD” strategy is never recommended in this newsletter.
CONSIDERABLE DAMAGE HAS BEEN DONE IN THE RECENT DOWNTREND. I hope you did not go on vacation and leave the triple ETF unattended
NOTE: The following chart does NOT include the 0.5% rise in the QQQ on Friday.
Please NOTE: You will see more attention paid to the QQQ (Nasdaq100 – the fund of the 100largest stocks without the slower financial stocks.
As you look at a 20-day HISTORY of the I below, look at the last 11 days (I have put a heavy box around those 11 trading days.).
In the “Change in Price” column, look at the last 9 trading days that I have “boxed:”
· 6 price changes are red or orange indicating their price fell from the day before, versus…
· Only 3 price changes were green or lime-green indicating they rose.
Of those last 11 trading days:
· There were only 2 days wereaccumulation days (days of heavy buying of this index.)
· With one more rising day (but with lower volume,) only 3 days were up versus 8 days down,
· I would expect the down days to takeaway more than the rising day added – and that is exactly what they did:
o The 3 up days added 2.4%
o The 8 down days took away 12.9% almost 5 times much.
LESSON to NOTE: Most indexes drop faster than they rise but this drop is accelerating! Notice on the QQQ chart above, I have installed a curve under the QQQ lows which emphasizes the accelerating drop.
Look below at the MARKET FACTOR, COUNTS & RATINGS table below.
Wow! Only two ratings are green:
· The S&P500 had a minor accumulation day - that means the S&P500’s price rose at least 0.2% with higher volume on Tuesday.
· The Nasdaq is above its 200-day line (NOT a very exciting state to note …. In fact rather boring.)
· Note the poor,laggard DJIA has an “E” rating signaling many investors are selling it off.
o IN FACT: The DJIA is the only of the 3 major indexes that is below its 200-day line. (Someone call the paramedics!)
And this market continues lower. (After the big runup earlier this year,I am not surprised …. And am not poor from it – since I made a lot in the first half of the year.)
The low number of stocks with an “A” rating certainly gives me pause before entering any new investments.
…. Even the QQQ is now 3.1% below its 50-day line!
Stay tuned! Those birds just aren’t going anywhere!
On the table below, note that the stocks with “A” ratings have almost dried up – at 4% of all stocks we follow. Meanwhile, 52% of the stocks have low “D” and “E” ratings today.
Looking at the last 5 weeks, note that this period has been a hard time to find stocks that have strong or rising prices.
REMEMBER:_____CASH IS A POSITION!
NOTE ### that I have changed the last column of the Accumulation/Distribution table below to focus on the (scary) sum of stocks with “D” and “E” ratings. Yikes!
One additional “Word to the Wise”…
>>>>>--- MOST MARKETS FALL FASTER THAN THEY RISE. Beware of buying any new position unless they are very healthy.
Please send questions,comments, suggestions, ideas and requests to: My text message account at (214) 995-6702.