Determine Market Trend (19 Feb 16)

Bull Market, Pullback, Correction and Bear Market

(1)     Pullback: -5% off 52W High   (2) Correction: -10% off 52W High   (3) Bear Market: -20% off 52W High

Benchmark	Symbol	% off 52-Wk High	Market Trend
S&P 500	SPY	-8.93%	Pullback
Dow 30	DIA	-9.0%	Pullback
Nasdaq 100	QQQ	-11.93%	Correction
Russell 2000	IWM	-21.30%	Bear Market

Although your ultimate goal is to use the stock market to build wealth, you must also avoid losing money.  Knowing how to read the market as a whole will help you to prosper during bull markets and protect assets during bear markets.

Long-Term Trend

The “big dog” of moving averages is the 200-day moving average.  If the index is trading above that level, the long-term trend is considered up; generally, the 200-day moving average is seen as a proxy for the long-term trend.

Benchmark	Symbol	Price	200-DMA	Market Trend
S&P 500	SPY	192.00	201.54	Downtrend
Dow 30	DIA	163.70	170.49	Downtrend
Nasdaq 100	QQQ	101.63	107.81	Downtrend
Russell 2000	IWM	100.45	115.20	Downtrend

In an up-trending market, I will lengthen holding times and give my holdings more room to run.  In a down-trending market, I use short holding times and grab profits quickly. 

  Short-Term Trend

Short-term trends can be captured using short-term moving averages.  The 20-day moving average provides you a simple yet effective way for knowing what side of the market you should be trading. 

Benchmark	Symbol	Price	20-DMA	Market Trend
S&P 500	SPY	192.00	189.32	Uptrend
Dow 30	DIA	163.70	161.05	Uptrend
Nasdaq 100	QQQ	101.63	100.69	Uptrend
Russell 2000	IWM	100.45	99.25	Uptrend

If the stock is currently trading below the 20-day moving average then you clearly should only take a short position; conversely, if the stock is trending higher then you should enter long.

Ratio Chart (SPY:$VIX): ST Uptrend

The SPY:$VIX ratio chart is best used to identify market bottoms. Each time the Percentage Price Oscillator (PPO 1,10,0) reading moves below -10 the S&P 500 (SPY) has reached a short-term market bottom.

Volatility Index (19 Feb 16): $VIX 3.29

The VIX has an inverse relationship to the price of the S&P 500. Thus, we often see the VIX making new highs as the market is making new lows. When the 2-period RSI of the VIX is above 90 we'll be looking to go long.

Leveraged ETFs (19 Feb 16): YANG $139.34

Buy (18) shares YANG @ $139.34
Target Price (10%): $153.30

Leveraged ETFs (19 Feb 16): LABD $68.01

Buy (37) shares LABD @ $68.01
Target Price (10%): $74.90

Leveraged ETFs (19 Feb 16): DWTI $271.67

Buy (9) shares DWTI @ $271.67
Target Price (10%): $299.00

Leveraged ETFs (19 Feb 16): DGAZ $22.12

Buy (113) shares DGAZ @ $22.12
Target Price (10%): $24.40

Determine Market Trend (12 Feb 16)

Bull Market, Pullback, Correction and Bear Market

(1)     Pullback: -5% off 52W High   (2) Correction: -10% off 52W High   (3) Bear Market: -20% off 52W High

Benchmark	Symbol	% off 52-Wk High	Market Trend
Dow 30	DIA	-11.40%	Corection
S&P 500	SPY	-11.48%	Correction
Nasdaq 100	QQQ	-15.06%	Correction
Russell 2000	IWM	-24.36%	Bear Market

Although your ultimate goal is to use the stock market to build wealth, you must also avoid losing money.  Knowing how to read the market as a whole will help you to prosper during bull markets and protect assets during bear markets.

Long-Term Trend

The “big dog” of moving averages is the 200-day moving average.  If the index is trading above that level, the long-term trend is considered up; generally, the 200-day moving average is seen as a proxy for the long-term trend.

Benchmark	Symbol	Price	200-DMA	Market Trend
Dow 30	DIA	159.98	171.37	Downtrend
S&P 500	SPY	186.63	201.84	Downtrend
Nasdaq 100	QQQ	98.02	107.94	Downtrend
Russell 2000	IWM	96.59	115.60	Downtrend

In an up-trending market, I will lengthen holding times and give my holdings more room to run.  In a down-trending market, I use short holding times and grab profits quickly. 

  Short-Term Trend

Average Directional Movement Index (ADX) – The indicator uses three lines to tell both the trend direction and the trend strength.  When the +DI is above the –DI, buying is stronger than selling.  When –DI is above the +DI, selling is stronger than buying.

Benchmark	Symbol	+DI	-DI	ADX	Trend
Dow 30	DIA	20.41	36.55	31.07	Downtrend
S&P 500	SPY	20.57	37.10	32.93	Downtrend
Nasdaq 100	QQQ	15.73	38.28	41.70	Downtrend
Russell 2000	IWM	15.38	36.09	45.16	Downtrend

The ADX line helps determine the strength of the trend.  An ADX reading above 25 indicates a strong trend.  If the trend is up, use bullish leveraged ETFs.  If the trend is down, use inverse leveraged ETFs.

Ratio Chart (SPY:$VIX): ST Uptrend

The SPY:$VIX ratio chart is best used to identify market bottoms. Each time the Percentage Price Oscillator (PPO 1,10,0) reading moves below -10 the S&P 500 (SPY) has reached a short-term market bottom.

Volatility Index (12 Feb 16): $VIX 30.21

The VIX has an inverse relationship to the price of the S&P 500. Thus, we often see the VIX making new highs as the market is making new lows. When the 2-period RSI of the VIX is above 90 we'll be looking to go long.

Leveraged ETFs (12 Feb 16): YANG $162.35

Buy (16) shares YANG @ $162.35
Target Price (10%): $178.60

Leveraged ETFs (12 Feb 16): DGAZ $17.52

Buy (143) shares DGAZ @ $17.42
Target Price (10%): $19.20

Leveraged ETFs (12 Feb 16): LABD $84.38

Buy (30) shares LABD @ $84.38
Target Price (10%): $92.90

Leveraged ETFs (12 Feb 16): DWTI $306.95

Buy (9) shares DWTI @ $306.95
Target Price (10%): $337.70

Determine Market Trend (5 Feb 16)

Bull Market, Pullback, Correction and Bear Market

(1)     Pullback: -5% off 52W High   (2) Correction: -10% off 52W High   (3) Bear Market: -20% off 52W High

Benchmark	Symbol	% off 52-Wk High	Market Trend
Dow 30	DIA	-10.31%	Correction
S&P 500	SPY	-10.85%	Correction
Nasdaq 100	QQQ	-14.97%	Correction
Russell 2000	IWM	-23.19%	Bear Market

Although your ultimate goal is to use the stock market to build wealth, you must also avoid losing money.  Knowing how to read the market as a whole will help you to prosper during bull markets and protect assets during bear markets.

Long-Term Trend

The “big dog” of moving averages is the 200-day moving average.  If the index is trading above that level, the long-term trend is considered up; generally, the 200-day moving average is seen as a proxy for the long-term trend.

Benchmark	Symbol	Price	200-DMA	Market Trend
Dow 30	DIA	161.94	171.82	Downtrend
S&P 500	SPY	187.95	202.40	Downtrend
Nasdaq 100	QQQ	98.12	108.24	Downtrend
Russell 2000	IWM	98.04	116.30	Downtrend

In an up-trending market, I will lengthen holding times and give my holdings more room to run.  In a down-trending market, I use short holding times and grab profits quickly. 

  Short-Term Trend

Average Directional Movement Index (ADX) – The indicator uses three lines to tell both the trend direction and the trend strength.  When the +DI is above the –DI, buying is stronger than selling.  When –DI is above the +DI, selling is stronger than buying.

Benchmark	Symbol	+DI	-DI	ADX	Trend
Dow 30	DIA	19.06	33.17	30.34	Downtrend
S&P 500	SPY	18.07	35.24	31.79	Downtrend
Nasdaq 100	QQQ	13.92	41.45	38.97	Downtrend
Russell 2000	IWM	13.40	35.75	43.66	Downtrend

The ADX line helps determine the strength of the trend.  An ADX reading above 25 indicates a strong trend.  If the trend is up, use bullish leveraged ETFs.  If the trend is down, use inverse leveraged ETFs.