Many of you have requested that I post a chart showing the recent performance of the GMI over the past year. The GMI, though not perfect, has successfully kept me on the right side of the market through the 2000-2002 and 2008 bear market declines. I simply go to cash in my university pension and trade the short side in my IRA once the GMI starts to remain consistently below 3. In order to show the GMI over time, I have plotted a weekly chart with the GMI changes for the last day of each week.
Month: June 2009
My market indicators keep improving; selling cash secured puts again
The GMI is back to 5 (of 6) and the GMI-R to 9 (of 10). There were 30 new highs in my universe of 4,000 stocks on Wednesday. Stocks on my IBD 100 lists at new highs include: TSRA, LL, SYNA, STAR, VPRT, URS, HDB, ICUI, MTXX, NTES and NVEC. I am selling puts on strong stocks and ETF’s in the anticipation that they will expire worthless on June 20. I have begun to dollar cost average my university pension funds back into this market. The trend of the QQQQ, SPY and DIA remain up.
Why search for individual stocks when we can ride the ultra ETF’s?
It is rare that I complete an analysis whose findings totally surprise me, but take a look at this one. A lot of the pundits claim that the ultra ETF’s, leveraged baskets of stocks that try to double or triple the performance of their underlying indexes or sectors, fail to achieve their goals. So, just to satisfy my curiosity, I compared the performance of the primary index ETF’s, SPY (S&P500) , DIA (Dow 30) and QQQQ (Nasdaq 100) with those of the leveraged ETF’s. There were exact comparisons for these indexes for the 2X ETF’s, but I had to choose other, more general indexes for the 3X ETF’s. The results blew me away…
The 2X and 3X Ultra ETF’s absolutely outperformed the standard index ETF’s in the period since the March bottom. For example, while the QQQQ (Nasdax 100) index ETF rose 42.9% in this period, the QLD (2x QQQQ ETF) rose 99.2% and the TYH (technology bull 3X ETF) rose 179.4%. In comparison, the top five individual stock performers in the Nasdaq 100 stocks rose from 138.8% (JAVA) to 180.57% ( STX). In fact, only 16 stocks (16%) in the Nasdaq100 (and 23% in the S&P500) rose 80% or more. So, the choice before us is to search for the needle in the 
haystack individual stock that might do really well in a bull rise, or to buy one of these 2X or 3X ultra long ETF’s and ride a basket of stocks with a lot more diversification and probably less risk than owning individual stocks. The key is to discern the trend accurately and to then ride the ultra ETF with the most potential for following that trend. Some ultra ETF’s also trade options…..