Monday, February 17, 2014

Market Analysis with M3 ....2.17.14

The markets have had a strong run and are now at TrendX overhead resistance levels. >>>>>>>>> (see TrendX chart in right side panel).
M3 has managed to book some nice gains but we are getting an early ALERT stop cross and a collapse of the SPY/SSO and SPY/XIV pairs % change in volatility that is approaching the zero line....which has typically resulted in a trend reversal at the cross line.
By the way, for those interested in more details on the VIX and XIV here's an excellent article:

Since many have asked about other possible setups using M3 here's a few ideas that may help to detect underlying relative strength in the major indices and to take advantage of leveraged ETFs.

First, a simple model which looks at relative strength in the S&P versus the DOW versus the Nasdaq.
We can turn the AUTO STOP on or off to further define both historical and current risk.
Various iterations of this thinking can be applied to M3 to boost potential short term gains (keeping in mind that the risk exposure also increases so watching the STOPS is, as always, important.)

Finally, we can change the whole focus of our attention using an M3 beta range approach and applying it to something other than this case QQQ which, based on the SPY/QQQ/DIA setup above has out performed SPY.
What's interesting here is that there are days when QQQ momentum was actually stronger than XIV, further revealing the QQQs tremendous recent relative strength.