Usually ETFs can be shorted, but I found that many Leveraged ETFs do not allow to be shorted, so in order to prepare for trading, I compile a list of Leveraged ETFs that allow shorting:
Sector Select Financial (XLF)
ProShares Ultra S&P (2x S&P) SSO (last dividend 8c per share paid on June 22nd)
ProShares UltraShort S&P (2x S&P Inversed) SDS
Direxion Daily Financial Bull 3x Shares (FAS) (last dividend 10c per share paid on March 23rd)
Here is a list of Leveraged ETFs that do not allow being short:
ProShares Ultra Nasdaq (2x NASDAQ) QLD
ProShares Ultra Financials (UYG)
Wednesday, June 30, 2010
US Stock Indexes broke down from head and shoulder neckline
Major US stock market indexes broke down from head and shoulder neckline today.
- S&P 500 H&S top is 1220, neck line is slightly downward tilted at 1042 area, so price target is 1042-(1220-1042) = 864, or 16% lower than today's close 1030
- NASDAQ H&S top is 2512, neck line is slightly upward tilted at 2120 area, so price target is 2120 - (2512-2120) = 1728, or 18% lower than today's close 2109
Thursday, June 24, 2010
TBT and TLT Chart Analysis: Bond Yield bullish reversal?
TBT formed a piercing line candle pattern today at historical support at right above 37. Today's lowest point is also the lowest point in the down trend since early April. PPO is rising while price is making new low, showing a bullish divergence.
On the contrary, TLT formed a dark cloud cover candle pattern. PPO and price are showing bearish divergence.
From a purely technical perspective, above are evidences for a potential bullish reversal for bond yields and bearish reversal for bond prices. With one concerning factor, volume for both TLT and TBT were below average.
My gut feeling is that with the almost unstopped bull run since last March, the market needs to have a long and deep enough correction to balance the bullish side of the move.
Advise to wait for more confirmation.
Saturday, May 29, 2010
Bull Market Correction or Start of Bear Market?
Most of time, market participants (hedge funds, prop desks) like to hide their hands as they don't like followers in the early stage of a market turning point. S&P rebounded from Tuesday low and closed fractionally above 200EMA on Thursday, but failed to close above 200EMA on Friday. The key question now remains: are we at a bull market correction or start of bear market? I'd like to use VIX, one of my favorite leading indicators and my favorite PPO divergence analysis tool to dissect early signs of future market direction
As you can see in the chart (click to enlarge), VIX dropped this week to a level that's higher than the level in the week when "European TARP" was announced, however, the PPO has dropped to a level lower than that week, this divergence is indicating that fear is subsiding as of now, and it is a slim of evidence that the market is under bulls' control despite the Friday's failed test of 200 EMA.
Euro Index made a new low last week, however comparing with the low it made in mid-May, the PPO is picking up, this divergence is suggesting a trend change is potentially forming.
Similar but contrary to Euro Index, US Dollar ETF (UUP) is showing a divergence between price move and PPO.
As you can see in the chart (click to enlarge), VIX dropped this week to a level that's higher than the level in the week when "European TARP" was announced, however, the PPO has dropped to a level lower than that week, this divergence is indicating that fear is subsiding as of now, and it is a slim of evidence that the market is under bulls' control despite the Friday's failed test of 200 EMA.
Euro Index made a new low last week, however comparing with the low it made in mid-May, the PPO is picking up, this divergence is suggesting a trend change is potentially forming.
Similar but contrary to Euro Index, US Dollar ETF (UUP) is showing a divergence between price move and PPO.
Monday, May 24, 2010
Shanghai Index Chart Analysis
In my previous post, I tried to predict the low end target of this round of Shanghai's bear market / bull market consolidation. Recently, Shanghai rose for 2 consecutive trading days, now the index is above 10 day EMA with higher than normal volume.
The chart above indicates Shanghai index is indeed at potential turning point:
1. two sets of Fibonacci scales, 1st from 2007 high to 2008 low, 2nd from 2008 low to 2009 high
2. the 2009 bull market ends at 38% level of 1st Fibonacci scale
3. we are now at 50% level of 2nd Fibonacci scale
If the scenario of consolidation ending soon turns out to be true, then the target of this market would be 61.8% of 1st Fibonacci scale, or 4400 level which is about 76% upside, and consider what will happen to Crude (USO) and Morgan Stanley China A Share Fund (CAF)
However, potential risk to this scenario is that rate hike hasn't happened yet. If it does, does it have potential to kill the possible rally? I would keep an eye on moving averages as trigger to enter.
The chart above indicates Shanghai index is indeed at potential turning point:
1. two sets of Fibonacci scales, 1st from 2007 high to 2008 low, 2nd from 2008 low to 2009 high
2. the 2009 bull market ends at 38% level of 1st Fibonacci scale
3. we are now at 50% level of 2nd Fibonacci scale
If the scenario of consolidation ending soon turns out to be true, then the target of this market would be 61.8% of 1st Fibonacci scale, or 4400 level which is about 76% upside, and consider what will happen to Crude (USO) and Morgan Stanley China A Share Fund (CAF)
However, potential risk to this scenario is that rate hike hasn't happened yet. If it does, does it have potential to kill the possible rally? I would keep an eye on moving averages as trigger to enter.
Thursday, May 20, 2010
Chart Indicators Glossary and Calculation Methodologies
This post summarizes major chart indicators calculation methodology and their main usage from the perspective of market timing.
McClellan Oscillator, a short- to intermediate-term momentum breadth indicator, It's calculated each day by taking the difference between the 39-day and 19-day exponential moving averages of the number of net advances on the NYSE/NASDAQ. This indicator is best used to time bottom of a market when there are positive divergence between the index and oscillator's negative readings, for more details, see here
Over-extended Ratio, this indicator can be used to identify potential market tops
Coppock Guide, this indicator can be best used to identify long-term market bottom
McClellan Oscillator, a short- to intermediate-term momentum breadth indicator, It's calculated each day by taking the difference between the 39-day and 19-day exponential moving averages of the number of net advances on the NYSE/NASDAQ. This indicator is best used to time bottom of a market when there are positive divergence between the index and oscillator's negative readings, for more details, see here
Over-extended Ratio, this indicator can be used to identify potential market tops
Coppock Guide, this indicator can be best used to identify long-term market bottom
Sunday, May 9, 2010
S&P 500 Chart Analysis
The S&P 500 neck line of March 09 head and shoulder bottom was 950, indicating the price target being 1233, the market's intermediate top on April 26th was 1219.8, just a few points below the target. Then we know the market violently crashed about 10% in next 2 weeks ended on 1110.88 on May 7th. The question is whether this is end of rally or is it a deep correction?
Signs supporting correction include:
- The rally started last March didn't experience any correction deeper than 10%, which opens up possibility of a 10%+ correction
- This correction may be similar to Jan correction in the fashion that it breaks rising wedge formation and forms a less upward sloping new rising wedge.
- April 26th market top was very close to, but has not reached price target of inverse head and shoulder pattern
- VIX spiked too fast (almost 200% increase in 2 weeks) which is comparable to what market experienced in late 2008, however, US economy now is in much better form than that of late 2008
- As of April 27, Bull/Bear spread (Investor Intelligence bullish sentiment minus bearish sentiment) is reaching towards 40 danger zone, but has not yet arrived there yet. For more details, see here.
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