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Power ETF Trading Picks
Our ETF picks are strongly correlated with the overall market. We prefer not to stand in front of a freight train. We watch the SPY closely, and place ETF trading signals accordingly.
See our full ETF trading track record.
Keep in mind that we do not trade every single month just for the sake of trading. Based on our ETF trading strategies, if strong ETF picks do not set up, we simply do not trade.
ETF Tops & Bottoms Oscillator
When the oscillator approaches extreme overbought and oversold values, we know a market turn is coming soon. Think of “overbought” and “oversold” like elastic stretched to its limits. When released the elastic will inevitably snap back to its original shape. The accuracy of this oscillator is remarkable in predicting market tops and bottoms, and helps us with our ETF picks.
ETF Divergence
Divergence is a critical component of our ETF trading strategies. When the indicators are doing the opposite of what the market is doing, we look for the market to change direction, and we start looking for trade entries.
ETF Money Flow & Buy / Sell Volume
Knowing whether big money is flowing into or out of the market is essential for trading and investing effectively. The market may be running up, but if big money if flowing out of the market, chances are the rally won’t be sustained for long. Buy / Sell Volume indicator for ETFs tells us exactly what we need to know in real-time when deciding which ETF trading strategy to act on.
ETF Short Squeeze
A short squeeze is when traders and investors are short an ETF trade and start losing money. These traders start covering and closing their positions as a result of feeling “squeezed.” With fewer orders on the short side, this essentially removes much of the resistance the ETF is experiencing. The ETF can explode to the upside very quickly.
You Can Buy an Inverse ETF.
This is an exchange-traded fund that provides you with the easiest way to bet on the decline of an index. In this case, “inverse” simply means opposite. So whereas a normal index ETF such as the S&P 500 SPDR (SPY) provides you with a profit if the S&P 500 goes up, an inverse ETF such as ProShares Short S&P 500 (SH) provides you with a profit if the S&P 500 goes down. If you own the SH ETF and the S&P 500 goes down 1%, then you earn 1%.
We Take Advantage of Leveraged ETFs.
In recent years, ETF companies have also invented leveraged ETFs, which provide you with two or three times the normal return of an index. Generally, the ones with “ultra” in their names are double-leveraged and the ones with “3X” in their names are triple leveraged.
Take for instance ProShares UltraShort Basic Materials (SMN). Today the Materials Select SPDR (XLB) declined 1.47%. If you owned SMN, your positioned gained 2.7%, which is roughly double 1.47%. (It’s never exactly double or triple because of costs and slippage.) The most popular triple inverse fund in the first two and a half months this year was Direxion Daily Financial Bear 3x (FAZ), which rose 178% from Jan. 2 to March 5 as the banking index that it was triple-short, the Dow Jones US Financials ($DJUSFN), declined 50%.
The key thing about the leveraged inverse ETFs is that they are only intended to provide double or triple the daily return of its underlying index, so they are not meant to be held for long periods of time unless you have a strong conviction that there will be a prolonged one-way move. If there is much zigzagging, the leveraged index funds will not move as you expect. An example from that same time period: the iShares China (FXI) fell -17% but its double inverse fund, ProShares UltraShort China (FXP) only rose 16% because the move was not made in straight line.
That’s why we feel these leveraged ETFs may be good for traders. We have used both positive and inverse ETF trading set ups when we have a high level of conviction in a multi-day one-way move.
However, in a sideways or choppy market, you will get chopped up in a leveraged inverse fund. It’s one of the weapons in our ETF trading arsenal, and we only trade them when appropriate.
Why not learn more about our ETF trading signals?
Request our Special Report, Six Secrets to Explosive Moves, or call us: (888) 295-4932 or (313) 263-3590.