Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

SPXU on the Way Down and UPRO on the Way Up

Stock-Markets / Stock Markets 2011 Oct 02, 2011 - 03:30 AM GMT

By: George_Maniere

Stock-Markets

Best Financial Markets Analysis ArticleWow! What a week! Friday ended the worst quarter for the stock market since 2010. After another choppy day, as expected, stocks sold off Friday, 10/28/11, at 3PM to close the day down 240 points o the Dow, 29 points on the S&P and an amazing 65 points on the NASDAQ. The close of 10903 on the Dow was seen as a psychological level of the already fragile economy turning from bad to worse.


All summer the markets have been beaten by the growing fears of a possible default by Greece and the likelihood of a global recession. The choppy data has led to bouts of buying and selling and it was not unusual to see 300 point swings on a slow day. The Dow, S&P 500 and the Nasdaq each have lost more than 12% this quarter. That’s the first that has happened since 2008.

The short story is that there has been some technical damage done. The market is broken and weak. I believe that the weakness is the start of a longer decline because bonds are increasing in value (which means a stronger dollar) and interest rates are low. Commodities will continue to sell off which is definitely an indication that the market economic activity is going to be weak.

Add to this that traders have made big moves in response to US economic data, which has suggested a slowdown. Europe continues to struggle and developing countries like China, which have been driving global growth, are showing signs of weakness. All the stars are in a line for a likely recession in the U.S.

The Pro Shares Ultra Pro Short S&P 500 (SPXU) seeks a triple leverage or 300% return on the inverse performance of the S&P 500. If you believe as I do that we are setting up for a leg down on the S&P then SPXU is the best way to profit from this trade. For several weeks I have been writing that SPXU was about to break out and I have taken my fair share of barbs for calling the leg down too early.

Monday, earnings season begins and if Friday was any indication of what investors have in mind for what they are likely to see and hear then Friday’s selloff was a prelude. Please see chart below.



The chart shows that the S&P has finally capitulated to the trend line. While there will still be resistance at 1120, once the S&P breaks that resistance level it will go to between 1120 and 1150 rather quickly. When it does I will sell the SPXU and buy UPRO. Once the S&P tests 1020 - 1050 it will work its way back up 1200. The best way to profit from this is to use UPRO.

Pro Shares Ultra Pro S&P 500 (UPRO) is a triple leveraged fund that seeks a 300% return on the performance of the S&P for a single day.

In conclusion, earnings report or no earnings report, the market is broken and it needs to heal. The S&P will need to test the 1020 / 1050 level before it can once again begin its assent. While it goes through these growing pains why not profit by using these tailor made stocks SPXU for the ride down and UPRO for the ride up.

Enjoy the ride!

By George Maniere

http://investingadvicebygeorge.blogspot.com/

In 2004, after retiring from a very successful building career, I became determined to learn all I could about the stock market. In 2009, I knew the market was seriously oversold and committed a serious amount of capital to the market. Needless to say things went quite nicely but I always remebered 2 important things. Hubris equals failure and the market can remain illogical longer than you can remain solvent. Please post all comments and questions. Please feel free to email me at maniereg@gmail.com. I will respond.

© 2011 Copyright George Maniere - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in