Studies: the stock market's price action is bullish while breadth is weakening

The U.S. stock market's own price action remains bullish. However, breadth is weakening (note the recent cluster of Hindenburg Omens).

Here's why you should focus on the bullish price action over the bearish breadth

https://bullmarkets.co/price-action-vs-breadth/

 

perfect another confirming "BUY" signal.

 

I was looking at the TOC of your book and you suggest leverage ETFs. Looking around I have found various articles suggesting to keep away from leveraged ETFs

https://www.forbes.com/sites/katest...hat-leveraged-etf-is-a-bad-idea/#6537c7a56ed2

https://thecollegeinvestor.com/4414/leveraged-etfs-dont-match-market-performance/

https://www.investopedia.com/articl...5/why-leveraged-etfs-are-not-longterm-bet.asp

https://seekingalpha.com/article/4107640-playing-fire-long-can-safely-hold-3x-leveraged-etf

Why then should leveraged ETFs be a good long term investment?

Thanks,
nt

 

Leveraged ETFs are GREAT.... if your play is in tune with the trend. But if you hold one where the underlying is back-and-forth or in the opposite trend, the cost of leverage will eat up your share value.... not to mention being "levered the wrong direction".



Above is what it's like to get a "long term, long levered Nasdaq play" correct.

Below is what it's like to get a "long term, long levered Nasdaq play, wrong.

 

yeah, when you win you are always right, but are you always a winner?

nt

 

Exactly.

That's why you need to ALWAYS trade with stops... even more so with leverage of any kind.

 

Oddly, the majority of clients with the firm I trade through are long Nasdaq but short Dow and S&P. No data on their time-frames of course but I wonder what they're expecting?

 

That's easy for now. The Nasdaq has had higher relative volatility and momentum. So... that's a "hedge play"... counting upon that relationship to continue. Profit potential is limited, but risk is also.

 

I don't get what you mean, they expect them to diverge further?

 

Of course. The Nas has been outperforming the larger stock indices, so investors are playing for that to continue. That is... if the Nas goes up by 10% and the larger stock indexes short plays go down by "only 8%", the Naz players win.

This chart shows the differential performance level between the Nas and Dow/SP. Those who play this spread have been hoping to capture the anticipated performance diff between the two.