Wednesday Update: Leveraged Index ETFs



With still two hours left in today's session the market has recovered all that it lost on Monday, and then some. Days like today can turn option traders inside out. There is a less anxiety-driven way to profit from the larger downtrend. It's described below, "Leveraged ETFs." As for today price action, a not so surprising violent upside counter-trend rally that has stripped away a chunk of option profits. But in so doing it has drawn a line in the sand for another leg down. On the S&P chart below I've marked today's low tick with another horizontal dark red line. When that line gets taken out, like every red horizontal line has been taken out so far in this bear market, today's rally will be long forgotten. 

Leveraged ETFs

Our trading signals, both for the Intermediate Term (Standard Service) and the Short Term (Premium Service), are always accompanied by trade recommendations designed to make the best bang for the buck using options. But the usefulness of our trading signals is not limited to options, as the signals can also be implemented with leveraged ETFs. 

In using the signals for buying leveraged ETFs repeat signals can be ignored, or used as add-on positions. They can also be used to craft a strategy whereby a designated profit-taking level is achieved (for example, 30% in a month) and the repeat signal is used to get back up to a full position.

For the current downtrend the first "official" Sell Signal (not counting trend-line breaks) was seen on November 12, with follow-up signals on December 4th. As with the options' strategy, if exiting at a designated profit-taking level, it is advised that at least a portion of the position be left on for further gains, just in case that repeat signal takes awhile to materialize. 

Here are the results from those November 12th Sells through closing pricing on December 24th, without taking into account any profit-taking or add-on strategies:

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