ETFs

As the amount of ETFs continue to rise, there are more options for subscribers with retirement accounts and taxable accounts. There are now bear ETFs that can be used to replace shorting or bear funds, as well as leveraged ETFs. There are also more possibilities to trade indices you may not have been able to trade in previous months. Liquidity (volume) is definitely a problem with most of these new ETFs, but as they are becoming more popular, in the near future we will be updating our long-term works page.

We advise subscribers to trade the NASDAQ 100, Russell 2000, and S&P 500, as it gives an even mix of large cap, small cap, and technology. Also, the three ETFs (QQQQ, IWM, and SPY) are extremely liquid. We will not encourage subscribers to buy into individual sectors, but we do plan on adding bear ETFs, leveraged ETFs, and some ETFs that can be used to supplement or replace the three mentioned above. We only mention international indices in the 401k allocation, as our model is based on the US stock market. We will alert our subscibers when we have added the ETFs to the website.

Commentary

Even though the market seems to reverse every day that starts strong, today's pullback was not that negative. In fact, today was a very interesting day. Finally, the NASDAQ 100, Semiconductor Index, and NASDAQ Composite greatly outperformed the DOW, S&P 500, and Russell 2000. CSCO led the NASDAQ 100 to a fractional gain, while the DOW fell almost 100 points. Even though one day does not define a trend, the gap between the indices was large enough to consider that today could be the start of new leadership.

The first chart is of the NASDAQ 100. You can see how the index has been able to stay above our support line. As long as the NASDAQ 100 can stay above 1475, there is no reason to think that the 1450 support area will be challenged.

The second chart we have been showing to our mid-term subscibers. It is a chart of SMH divided by DIA. You can notice how SMH:DIA cleared its trend channel today and only pulled back to downtrend line. This strongly suggests that the Semiconductor Index will continue to outperform the Dow.

The last chart is of CSCO. You can see how CSCO has continuosly found support at the 17 level. Today, the stock broke above its 50 and 200 day moving averages, before it ran into strong resistance at 20. If CSCO is able to break above 20, we expect a move to the 21 area. A sustained break above that area would push the stock to 22. With a 14% move today, it is not surprising that the volume was extremely high. This chart may be hinting at future leadership in technology. Until the 20 area is broken, we cannot be convinced that CSCO will continue higher.