Trading in Our Current Bear Market

Investing Strategies Technical Trader's Sanctuary
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The following is just notes to myself, not investing advice.

The perma-bulls think our current recession will be short-lived, and they blame all problems on Trump, Putin, racism, etc. Realists argue otherwise and point to three decades of Fed intervention and money printing as the primary causes of present asset-price declines. (Like, whatever.) Meanwhile, BarChart is a more than decent charting service, and it’s free and what I’ll be using for this project.

The Atlantic Fed is projecting zero growth in the US economy for the 2nd quarter. That’s going to translate to lower company earnings being reported when the next circus of a reporting season begins. One way to profit would be to sell short individual stocks. But that means taking on company-specific risk. Another way to profit would be to track and trade inverse ETFs. Below is a list of 3x/-3x pairs. The ‘%chg’ is 1-day. Some are pretty thinly traded. Some have overlapping objectives. But a few might be worth trading with an intended, 3-5 day holding-period. Do your due diligence, and --for goodness sakes-- bet small and trail stops.

Arindam

 

**Symbol	Last	%Chg	1M Avg Vol		Name**

**TMF	$12	1.4%	 3,160,255 		20+ Year Trsy Bull 3X Direxion**
**TMV	$110	-1.3%	 648,877 		20+ Year Trsy Bear 3X Direxion**

**TYD	$35	0.4%	 20,755 		7-10 Year Treasury Bull 3X Direxion**
**TYO	$12	-0.2%	 207,741 		7-10 Year Treasury Bear -3X Direxion**

**WEBL	$8	5.8%	 1,237,646 		DJ Internet Bull 3X Direxion**
**WEBS	$56	-7.7%	 401,377 		DJ Internet Bear 3X Direxion**

**EDC	$36	1.1%	 82,286 		Emrg Mkts Bull 3X Direxion**
**EDZ	$14	-1.2%	 703,791 		Emrg Mkts Bear 3X Direxion**

**FAS	$59	0.6%	 1,640,218 		Financial Bull 3X Direxion**
**FAZ	$31	-1.3%	 3,044,464 		Financial Bear 3X Direxion**

**YINN	$85	5.1%	 1,853,630 		FTSE China Bull 3X Direxion**
**YANG	$13	-5.4%	 5,151,604 		FTSE China Bear 3X Direxion**

**JNUG	$45	-3.9%	 1,259,759 		Junior Gold Mine Bull 2X Direxion**
**JDST	$11	4.0%	 3,585,136 		Junior Gold Mine Bear 3X Direxion**

**BNKU	$22	1.7%	 128,318 		Microsectors 3X U.S. Big Banks ETN**
**BNKD	$17	0.1%	 49,100 		Microsectors -3X U.S. Big Banks ETN**

**NRGU	$360	-18.9%	 155,523 		Microsectors U.S. Big Oil Index 3X ETN**
**NRGD	$88	17.8%	 254,564 		Microsectors -3X U.S. Big Oil Index ETN**

**BULZ	$4	3.3%	 5,856,254 		Microsectors Fang & Innovation 3X ETN**
**BERZ	$45	-3.6%	 124,323 		Microsectors Fang & Innovation -3X ETN**

**FNGU	$7	4.3%	 18,212,287 		Microsectors Fang+ 3X ETN**
**FNGD	$73	-4.8%	 886,268 		Microsectors Fang+ -3X ETN**

**GDXU	$7	-3.8%	 993,109 		Microsectors Gold Miners 3X ETN**
**GDXD	$14	4.2%	 104,464 		Microsectors Gold Miners -3X ETN**

**OILU	$40	-16.1%	 140,368 		Microsectors Oil & Gas Exp. & Prod. 3X Leveraged**
**OILD	$7	15.7%	 399,300 		Microsectors Oil & Gas Exp. & Prod. -3X Inverse**

**DRN	$12	2.0%	 239,295 		Real Estate Bull 3X Direxion**
**DRV	$60	-1.9%	 443,900 		Real Estate Bear 3X Direxion**

**SPXL	$60	0.4%	 10,414,368 		S&P 500 Bull 3X Direxion**
**SPXS	$30	-0.4%	 24,500,623 		S&P 500 Bear 3X Direxion**

**HIBL	$24	5.5%	 212,595 		S&P 500 High Beta Bull 3X Direxion**
**HIBS	$13	-5.9%	 1,068,086 		S&P 500 High Beta Bear 3X Direxion**

**LABU	$5	16.8%	 54,259,859 		S&P Biotech Bull 3X Direxion**
**LABD	$54	-17.3%	 3,439,091 		S&P Biotech Bear 3X Direxion**

**GUSH	$146	-14.6%	 1,038,241 		S&P Oil & Gas Expl Bull 3X Direxion**
**DRIP	$22	14.6%	 4,729,104 		S&P Oil & Gas Expl Bear 3X Direxion**

**SOXL	$14	1.0%	 57,221,504 		Semiconductor Bull 3X Direxion**
**SOXS	$66	-1.2%	 11,387,154 		Semiconductor Bear 3X Direxion**

**TNA	$31	2.4%	 11,251,259 		Smallcap Bull 3X Direxion**
**TZA	$51	-2.4%	 9,682,009 		Smallcap Bear 3X Direxion**

**TECL	$27	2.5%	 4,960,109 		Technology Bull 3X Direxion**
**TECS	$54	-2.5%	 3,291,436 		Technology Bear 3X Direxion**

**UDOW	$45	-0.5%	 4,918,050 		Ultrapro Dow30 ETF**
**SDOW	$41	0.6%	 8,599,759 		Ultrapro Short Dow 30 Proshares**

**TQQQ	$23	3.7%	 181,475,734 		Ultrapro QQQ ETF**
**SQQQ	$64	-3.2%	 122,522,023 		Ultrapro Short QQQ ETF**

**UMDD	$15	2.4%	 29,259 		Ultrapro Midcap 400 Proshares**
**SMDD	$35	-2.7%	 25,209 		Ultrapro Short Midcap 400 Proshares**

**URTY	$36	2.2%	 930,150 		Ultrapro Russell 2000 ETF**
**SRTY	$79	-2.4%	 1,632,564 		Ultrapro Short Russell 2000 ETF**

**UPRO	$32	0.2%	 12,507,818 		Ultrapro S&P 500 ETF**
**SPXU	$22	-0.4%	 24,851,086 		Ultrapro Short S&P500 ETF**
2 Likes
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The following is a decent chart template, whose entry/exit rules are pretty obvious. Its downside is that whipsaws can be minimized but only at the cost of less advantageous prices. That’s the tradeoff, information-risk vs price-risk, which everyone will weight differently. Me? I want to be in fast and out fast on the theory, “Better a missed opportunity than a realized loss.”

So, a suggestion. Write down your set of entry/exit rules, scroll the chart back in time, and then do walk forwards, one day at time. If your rules grab most of a move and mostly keep you out of trouble, you’re done and can shift from back-testing to actual trading.

Second, this is ‘trading’, not ‘investing’. So trail a stop.

Third, as often as not, prices retest support/resistance. That means your entries might not be clean/crisp as you’d like and the need to ‘average down’, which --admittedly-- is a widely condemned practice for good reasons, but often a necessity. so decide beforehand your scaling scheme AND STICK TO IT.

Fourth, depending on your broker, consider using OCO orders. (TD facilitates them. Schwab doesn’t.)

Fifth, keep your bets equally-sized.

Lastly, don’t torture a chart into confessing what you want it to tell you. If the evidence for an entry isn’t drop-dead obvious, it isn’t “evidence”. Exits, OTOH, can and should be done on the least hint of trouble. No waiting and hoping.

Arindam

https://www.barchart.com/shared-chart/FAZ?chart_url=i_165557…

1 Like
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Here’s another clear-cut chart. https://www.barchart.com/shared-chart/FAZ?chart_url=i_165557…

Here’s a set of suggested entry/exit rules.

ENTER at the next day’s open if
prices close above the previous day
and the close is ‘up’ for the day
and the close is above the faster MA
and StochRSI has moved above 0.20
and MOM’s green line has moved above its red line.

That is a very demanding, all-conditions-must-be-met, trading rule. Your personal style might want to relax some of those conditions or to add others. Ditto your exit rule. You might want to see a whole list of negative conditions, or you might want to exit at the least sign of trouble. Chef’s Choice.

Also, every parameter for the indicators can be changed, as well as the bar type, the lookback period, etc. What you’re trying to create is a picture of prices through time that you can make sense of at a glance and decide ‘Yea’ or ‘Nay’ about in half a second. If 'Nay", you go to the next chart. If ‘Yea’, then you double-check your reaction. If the opportunity still looks promising, you size a position and write the order. Wash. Rinse. Repeat. This trading stuff ain’t rocket science. But it does require consistency and discipline.

Arindam

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I appreciate you putting out this list of ETFs.

I have been thinking about it some, and wondering what your thought are on short term trading on ETFs versus individual stocks as you have been outlining in this thread.

Are individual stocks more likely to better follow buy/sell signals as you have outlined, or are ETFs? Or in other words, does the flattening effect of multiple stocks in an ETF tend to delay or deflate signals?

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jhawker85,

The list posted is only but a few that Adrindam has been working on his project.

The following is going to explain the Tetter-Totter Principle that is crash and recession-proof to help protect your ASSets.

https://discussion.fool.com/is-anybody-losing-value-35104345.asp…

Quillnpenn

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Mike,

You ask a shrewd question whose answer you can easily discover for yourself by grabbing an ETF, pulling its schedule of holdings, and then entering them --plus the ticker for the ETF-- at this website. https://www.portfoliovisualizer.com/asset-correlations

What you’ll find is this. The composite is less volatile --using StvDev as an imperfect measure of volatility-- than many of its underlying. BUT TRADERS WANT VOLATILITY. What they DON’T want is DISORDERLINESS. Be it stocks or ETFs, you want be getting into and out of things that move a lot, up or down, not things that go sideways or kinda just stumble around AND you want things that aren’t “frantic” or “chaotic” or that move too fast to be able to execute on. E.g., I hate trading the SPXL/SPXS pair, but the LABU/LABD pair is very friendly, with nice swooping curves.

Second question. What do you mean by ‘short-term’? Under two minutes? Less than an hour? The sort of charts I’m trying to build are worthless for short-term trading. Then, what will serve you best is a bare chart, and often a tick chart instead of a longer aggregation. What you’re looking for, and what you’re trying to get yourself in synch with, is the rhythms of that specific market, so much so, you can sense when prices are stalling, which is when you want to be getting in or out. Back and forth. Advance and retreat. Thrust and parry. If you’re trading short-term, you gotta be meaner and faster than your counterparty and constantly be “skating to where the puck is going to be”.

And, frankly, short-term trading is a horrible thing to do to oneself and very hard to sustain. 30-40 minutes? Sure, that’s fun. But the rest of one’s time and money ought to be focused on longer-term plays, not the fluff and forth of what happens intraday.

How long is ‘longer-term’? 3-5 days seems to me to a good time frame to focus on. The charts I build seem well suited to that. If the runup lasts longer, all the better. But eventually, prices stall and reverse, sometimes due to “news” or ‘fundamentals’ or macro events, and sometimes just because that’s how markets work.

Suggestion. If you want to explore ‘short-term trading’, do so in an tax-sheltered account --so you won’t have to deal with the IRS at year’s end-- and make your bets small.

Arindam

1 Like
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By short term, I meant 3-5 days.

I only occasionally am in and out of a position within one day. For me, it would have to be a fairly unique set up to do that at this point.

Thanks again for your comments and starting this discussion.