I think you could make a better argument for selling now as SPY / QQQ gets near downtrend resistance. You could show how close that is now. For QQQ resistance is about +3% higher. If you sell there and set a stop buy +2% higher you can avoid further losses, but still catch the breakout.
Totally agree. I simply didn't bother getting specific. If anyone reading this is still holding QQQ or SPY, they're either reading it for the first time, or they simply haven't been listening. For first time readers, I wrote, "There’s also little risk to sell while the markets are ‘above water’ now.", so they should consider selling at any point based on our strategy. Basically, wherever it opens Monday, be ready to sell. As you say, a gap up and small rally could put it near downtrend resistance, so use a tight stop or sell with a stop buy for maybe 80% of the shares you sold and put in a stop sell where you sold the others. For QQQ, I also have an old resistance, then support line at 449, or set a stop sell at 441, just below Friday's low of 441.33. I can't imagine any first time reader taking action on Monday, but good on them if they do. My intent was to get them to take action eventually, and avoid a possible 45% further, like in 2008-9.
I had not noticed the similarities to 3 years ago. But I did notice SPY broke up trend support on 18DEC2024. 585 is the critical support I am using for SPY. It was a bear trap on 20DEC, but now we have closed below that level. Currently SPY is right at weekly support similar to how you have it drawn.
My VIX strategy is to buy UVXY as SPY puts in a lower high with a long red candle. That has been successful in backtests. Tues 07JAN was exactly that type of day to buy at the end of the day.
However, I am not trading UVXY right now. I am only trading long, but hold 60% cash. Now that SPY is in a wedge between the weekly up trend and daily downtrend, I can just wait for SPY to break one way and follow the trend. I am tentative to short anything as it is usually the wrong trade, but I understand how a UVIX trade can net 100 to 1000%. Even in a bear market there are amazing bull rallies that can be traded.
Along with SPY at weekly uptrend support, I see QQQ still above horizontal support at 501 and well above weekly uptrend support around 482.
I also don't recommend JC's strategy of buying dips on 3X leveraged ETFs. It is probably OK on TQQQ, but SOXL and LABU (BOIL and others) can quickly see losses that may never be recovered. Holding a 3X ETF for periods greater than a couple months shows massive ignorance to the math behind it, and is an unnecessary risk.
I don't like the idea of buying UVXY at the end of any day. I think Tuesday was exactly the day to buy early, holding a hard floor and a higher low from Monday. That's ideal. A stop sell just below Monday's low 19.05 at say 18.99 is only -0.7% from buying 19.12 Tuesday's low, and you're buying 4.6% below Monday's high where you might have sold. Tuesday closed +11.1% from the low, so selling UVXY and buying VIXY would have been a conservative strategy.
Wednesday could have easily opened back near 20, where it held above most of the day on Tuesday. That's -5% from buying late on Tuesday, and it could have then dropped. The movement on the day Wednesday and Friday was pretty soft, with lower highs from the early high, but it closed strong, so I'm holding some UVXY.
I plan to review the charts from 2022 to help me make better trades now. In general, I need to switch from being cautious and worrying about drops. If it's an early low, stay with it all day, and it's okay to add on higher lows on the day. I've also done okay holding both UVXY and SOXL until directions are established. The last issue is Trump. VIX dropped a huge amount after the election, so it might make a 'surprise' drop again when he takes office.
VIX dropped after the election because the uncertainty was over. I don't think there is much uncertainty now, politically. I will continue to ignore news as far as trading goes.
Looking at VIX it is in a range of 16-23. While in this range there is a risk of climbing to 23 or over that needs to be respected. Watch if VIX makes a lower high around 22-23 this week and heads back down.
I think you have the right mindset for UVXY. Be ready to buy as it climbs. I'm looking for a gap down on SOXL for another potential bear trap.
I agree it is not best to buy UVXY late in the day, but if you missed buying Tuesday AM, it was still better to buy later in the day than not buy at all.
Be careful comparing with 2022. Today could also be similar to Dec 20, 2022 or Oct 04, 2022, where a very bearish lower low was the best time to go long. Or like Oct 26, 2023. I'm looking at QQQ for these dates and seeing my critical support at 501 lines up with the 50 day eMA (499.85) which is often support during bull runs. We are due for a bounce off the 50 dat eMA since it hasn't been tested since Sep 11, 2024. It's hard to imagine QQQ coming this close and not testing 501, and that would probably scare a lot of people into selling after the past 3 days of decline. Perfect time for big money to buy those shares at a discount.
The more I review, the more convinced I am that the best strategy is to take an early setup and give it time to move on the day. Letting the markets drop some more before buying shares at a discount, seems like a reasonable idea, and we can simply follow along where they push it.
QQQ and SPY are still in weekly bull trends, though SPY is already at support. With SPY it hasn't tested the 200 day eMA for over a year and will likely do so if SPY stays below 600. I think that is the easy way to play. Above 600, and SPY is going to new ATH.
QQQ looks fine above 501 which passed a retest in Jan. Weekly support is also at 501.
A bounce to a lower high for both would be an excellent opportunity for UVXY or UVIX.
I think you could make a better argument for selling now as SPY / QQQ gets near downtrend resistance. You could show how close that is now. For QQQ resistance is about +3% higher. If you sell there and set a stop buy +2% higher you can avoid further losses, but still catch the breakout.
Totally agree. I simply didn't bother getting specific. If anyone reading this is still holding QQQ or SPY, they're either reading it for the first time, or they simply haven't been listening. For first time readers, I wrote, "There’s also little risk to sell while the markets are ‘above water’ now.", so they should consider selling at any point based on our strategy. Basically, wherever it opens Monday, be ready to sell. As you say, a gap up and small rally could put it near downtrend resistance, so use a tight stop or sell with a stop buy for maybe 80% of the shares you sold and put in a stop sell where you sold the others. For QQQ, I also have an old resistance, then support line at 449, or set a stop sell at 441, just below Friday's low of 441.33. I can't imagine any first time reader taking action on Monday, but good on them if they do. My intent was to get them to take action eventually, and avoid a possible 45% further, like in 2008-9.
I had not noticed the similarities to 3 years ago. But I did notice SPY broke up trend support on 18DEC2024. 585 is the critical support I am using for SPY. It was a bear trap on 20DEC, but now we have closed below that level. Currently SPY is right at weekly support similar to how you have it drawn.
My VIX strategy is to buy UVXY as SPY puts in a lower high with a long red candle. That has been successful in backtests. Tues 07JAN was exactly that type of day to buy at the end of the day.
However, I am not trading UVXY right now. I am only trading long, but hold 60% cash. Now that SPY is in a wedge between the weekly up trend and daily downtrend, I can just wait for SPY to break one way and follow the trend. I am tentative to short anything as it is usually the wrong trade, but I understand how a UVIX trade can net 100 to 1000%. Even in a bear market there are amazing bull rallies that can be traded.
Along with SPY at weekly uptrend support, I see QQQ still above horizontal support at 501 and well above weekly uptrend support around 482.
I also don't recommend JC's strategy of buying dips on 3X leveraged ETFs. It is probably OK on TQQQ, but SOXL and LABU (BOIL and others) can quickly see losses that may never be recovered. Holding a 3X ETF for periods greater than a couple months shows massive ignorance to the math behind it, and is an unnecessary risk.
I don't like the idea of buying UVXY at the end of any day. I think Tuesday was exactly the day to buy early, holding a hard floor and a higher low from Monday. That's ideal. A stop sell just below Monday's low 19.05 at say 18.99 is only -0.7% from buying 19.12 Tuesday's low, and you're buying 4.6% below Monday's high where you might have sold. Tuesday closed +11.1% from the low, so selling UVXY and buying VIXY would have been a conservative strategy.
Wednesday could have easily opened back near 20, where it held above most of the day on Tuesday. That's -5% from buying late on Tuesday, and it could have then dropped. The movement on the day Wednesday and Friday was pretty soft, with lower highs from the early high, but it closed strong, so I'm holding some UVXY.
I plan to review the charts from 2022 to help me make better trades now. In general, I need to switch from being cautious and worrying about drops. If it's an early low, stay with it all day, and it's okay to add on higher lows on the day. I've also done okay holding both UVXY and SOXL until directions are established. The last issue is Trump. VIX dropped a huge amount after the election, so it might make a 'surprise' drop again when he takes office.
VIX dropped after the election because the uncertainty was over. I don't think there is much uncertainty now, politically. I will continue to ignore news as far as trading goes.
Looking at VIX it is in a range of 16-23. While in this range there is a risk of climbing to 23 or over that needs to be respected. Watch if VIX makes a lower high around 22-23 this week and heads back down.
I think you have the right mindset for UVXY. Be ready to buy as it climbs. I'm looking for a gap down on SOXL for another potential bear trap.
I agree it is not best to buy UVXY late in the day, but if you missed buying Tuesday AM, it was still better to buy later in the day than not buy at all.
Be careful comparing with 2022. Today could also be similar to Dec 20, 2022 or Oct 04, 2022, where a very bearish lower low was the best time to go long. Or like Oct 26, 2023. I'm looking at QQQ for these dates and seeing my critical support at 501 lines up with the 50 day eMA (499.85) which is often support during bull runs. We are due for a bounce off the 50 dat eMA since it hasn't been tested since Sep 11, 2024. It's hard to imagine QQQ coming this close and not testing 501, and that would probably scare a lot of people into selling after the past 3 days of decline. Perfect time for big money to buy those shares at a discount.
The more I review, the more convinced I am that the best strategy is to take an early setup and give it time to move on the day. Letting the markets drop some more before buying shares at a discount, seems like a reasonable idea, and we can simply follow along where they push it.
QQQ and SPY are still in weekly bull trends, though SPY is already at support. With SPY it hasn't tested the 200 day eMA for over a year and will likely do so if SPY stays below 600. I think that is the easy way to play. Above 600, and SPY is going to new ATH.
QQQ looks fine above 501 which passed a retest in Jan. Weekly support is also at 501.
A bounce to a lower high for both would be an excellent opportunity for UVXY or UVIX.