From Steve's Commentary for July 6 at The Market Forecast:
"[W]e had two incredibly sloped intermediate moves during our first six months of trading this year. If you followed only the intermediate cycle and just played it twice, using the DXD in the January-February decline, you gained about 46%. Since the March 6th lows, the DDM rose to a high with gains of 70%. That's a whopping 116% so far this year. If you add to that the ability to trade many of the shorter term swings in between those moves, the returns go much higher.
"But don't worry if all the news kept you out too long, or you struggled with taking profits too early, or you are just learning how to play both sides of the market. The important thing for everyone here, is that you didn't get slaughtered by the bear side of the markets as did just about everyone else. You've managed to be profitable during an historic time when most investors were left holding the bag at the top, and who are still down some 40% from where they were in October 2007 (even after the recent recovery rally).
"Best of all, there is plenty of big swing action remaining and our cycle work should keep us on the right side so we can do it all again!"
Exactly what is Steve talking about?
First, our cycle charts tell us what is coming next. They are great for predicting the market.
Second, we use simple technical indicators to confirm market moves. We'll include a 5, 30 and 50 day moving average to define key support and resistance levels. Throw in Steve's favorite short-term crossover, along with a couple of tools he has refined, for intraday trading confirmations.
And third, we use Exchange Traded Funds (ETFs) to take advantage of moves up and down. Why ETFs? To keep it simple.
Many investors are spending valuable time trying to identify good stocks that will outperform the market. It's time-consuming work.
The fact is, research shows that only 25% of stocks beat the market on average. Even fewer are real "home runs". And a full 75% of stocks fail to keep up with the market. We don't like those odds.
Think about those facts. If a rising market lifts good stocks and the poor ones fail to keep pace, why waste time looking for the home run stocks? Simply trade the market that lifts those stocks!
If you want to outperform a bullish move, trade the "double-beta" ETF tied to that index. Double-beta shares are designed to move up twice as fast as the underlying index. Is the market turning, heading down? Trade the double-beta ETF intended to move up twice as fast as its underlying index is falling.
We'd rather identify market direction, correctly forecast reversals and re-entry points for profitable trades, and then trade the entire index with the corresponding ETF.
We recommend the DDM, QLD, SSO, FAS for bullish markets moving up. The first three are double-beta shares tied to the Dow, the NASDAQ, and the S&P 500, respectively. As for the FAS, that one is a triple-beta ETF intended to move up three times as fast as the Russell 1000 Financial Index.
We recommend the DXD, QID, SDS, FAZ for bearish markets moving down. Like their counterparts above, the first three are double-beta shares tied to the Dow, the NASDAQ, and the S&P 500, respectively. The key difference is that they are designed to move up when the underlying index moves down. The FAZ is a triple-beta ETF intended to move up three times as fast as the Russell 1000 Financial Index is moving down.
Caution: These ETFs are not "buy-and-hold" ETFs. They are intended for trading. Learn to do it right and you should see great results.
Remember to paper trade any new strategy or tools to become familiar with them and ensure you are trading profitably.
