As with the industry groups and sectors, nearly every ETF has topping PMOs and PMO SELL signals in overbought territory. This narrowed the list down considerably for ETF Day, but nearly all of the ETFs with rising momentum were inverse ETFs.
Interestingly, I just received an email from a subscriber regarding inverse ETFs, very timely. To summarize it, she was wondering if you can use the same methodology using the same indicators on an inverse ETF and which ETFs I'd recommend using in a bear market.
Well, first of all you know that I cannot give recommendations. But, I can expose readers to inverse ETFs on ETF Day (if warranted). I use the same methodology on every chart. The indicators are sensitive to price action. They don't know whether it is an inverse or not.
My main concern with inverse ETFs is that they are usually "juiced" (2x or 3x the inverse of a sector/index). Volatility will be a problem right out of the gate. One possibility is to short the 1x bull ETFs. For example, shorting the SPY or QQQ.
After all that, I am including one juiced ETF today and there are plenty in the "Runners-Up" category. Just be very careful and know that you have to watch like a hawk. Think days not weeks as your timeframe.
Good Luck & Good Trading!
Today's "Diamonds in the Rough": DOG, DUST and DWSH.
"Runner-up": BERZ, BTAL, DBA, DRV, DBMP, EPV, PFIX, SARK, URA and URNM.
RECORDING LINK (8/26/2022):
Topic: DecisionPoint Diamond Mine (8/26/2022) LIVE Trading Room
Start Time: Aug 26, 2022 09:00 AM
Meeting Recording Link
Access Passcode: August*26
REGISTRATION For Friday 9/2 Diamond Mine:
When: Sep 2, 2022 09:00 AM Pacific Time (US and Canada)
Topic: DecisionPoint Diamond Mine (9/2/2022) LIVE Trading Room
Register in advance for this webinar HERE
Save the registration confirmation email with login instructions in case Zoom doesn't notify you in time.
Last Monday's Recording:
Welcome to DecisionPoint Daily Diamonds, wherein I highlight ten "Diamonds in the Rough" per week. These are selected from the results of my DecisionPoint Scans, which search for stocks that could benefit from the trend and condition of the market. Remember, these are not recommendations to buy or sell, but are the most interesting of the stocks that surfaced in my scans. My objective is to save you the work of the initial, tedious culling process, but you need to apply your own analysis to see if these stocks pique your interest as well. There are no guaranteed winners here!
"Predefined Scans Triggered" are taken from StockCharts.com using the "Symbol Summary" option instead of a "SharpChart" on the workbench.
ProShares Short Dow30 (DOG)
DOG provides inverse exposure to the price-weighted Dow Jones Industrial Average, which includes 30 of the largest US companies. Click HERE for more information.
Predefined Scans Triggered: Improving Chaikin Money Flow.
DOG is down -0.03% in after hours trading. This inverse of the Dow 30 is not "juiced" so volatility won't be as much of an issue. The PMO is on a crossover BUY signal and the RSI is in positive territory. Stochastics are above 80 and obviously it is outperforming the SPY. You can see the volatility is low given the stop doesn't need to be much lower than 5%. It is set around 5.1% or $33.44.
The weekly PMO had a crossover SELL signal earlier this month, but the PMO has done an about face and is rising again. Over 2022, this has been an excellent performer. The weekly RSI is positive and rising. If we get the breakout, the upside target is about 18.5%.
Direxion Daily Gold Miners Index Bear 2x Shares(DUST)
DUST provides 2x inverse exposure to a market-cap-weighted index of global gold and silver mining firms. For more information click HERE.
Predefined Scans Triggered: New 52-week Highs, P&F Ascending Triple Top Breakout and P&F Double Top Breakout.
DUST is down -0.72% in after hours trading. I hesitated to include this one. I'm still bearish on Gold Miners, but this is "juiced" 2x and we know GDX (Gold Mining ETF) is very oversold and could see a reversal off the current support level. DUST broke out and GDX broke down. I included it because the PMO just had a crossover BUY signal and breakout today. The RSI is positive and not overbought. Stochastics are rising and above 80. Obviously it has been a big out-performer. The stop is kind of thin for a juiced ETF at 8%, but that does line up below the last August top at around $24.39.
As far as this ETF, it isn't actually above long-term resistance, yet. The weekly RSI is positive and the weekly PMO is rising strongly. I've annotated that the PMO is not overbought given the bottom of its zone is about -20. Also, I'm using a log scale which I normally don't do.
AdvisorShares Dorsey Wright Short ETF (DWSH)
DWSH is actively managed to achieve long-term capital appreciation by shorting US-listed large-cap companies exhibiting weak relative strength. For more information click HERE.
Predefined Scans Triggered: None.
DWSH doesn't trade after hours from what I can see. It is definitely a low volume ETF, but it passes my test of 50-day SMA of daily volume > 100,000. You should click on the "more information" link above as it shorts some interesting symbols. This looks like a "V" bottom pattern. After price retraces 1/3rd of the prior decline, the expectation is a breakout. The RSI is positive and the PMO is rising on an oversold crossover BUY signal. Stochastics are firmly above 80 and it has been outperforming the SPY. One issue would be the OBV negative divergence. The stop is set at 7.9% around $8.88.
This is another log scale weekly chart. We have a breakout above strong overhead resistance. The weekly RSI just moved into positive territory and the weekly PMO has turned up and should give us a crossover BUY signal shortly if the rally continues. If it can get to the 2022 high, that would be a 17.1% gain.
Don't forget, on Thursdays I look at reader-requested symbols, click HERE to send me an email. I read every email I receive and try to answer them all!
Current Market Outlook:
Market Environment: It is important to consider the odds for success by assessing the market tides. The following chart uses different methodologies for objectively showing the depth and trend of participation for intermediate- and long-term time frames.
- The Silver Cross Index (SCI) shows the percentage of SPX stocks on IT Trend Model BUY signals (20-EMA > 50-EMA)
- The Golden Cross Index (GCI) shows the percentage of SPX stocks on LT Trend Model BUY signals (50-EMA > 200-EMA)
Don't forget that as a "Diamonds" member, you have access to our GCI/SCI curated ChartList on DecisionPoint.com. You'll find it under "Members Only" links on the left side on the Blogs and Links Page.
Here is the current chart:
Full Disclosure: I am 40% exposed.
I'm required to disclose if I currently own a stock I mention and/or may buy/short it within the next 72 hours.
"Technical Analysis is a windsock, not a crystal ball." - Carl Swenlin
(c) Copyright 2022 DecisionPoint.com
Watch the latest episode of DecisionPoint with Carl & Erin Swenlin on Mondays 7:00p EST or on the DecisionPoint playlist on the StockCharts TV YouTube channel here!
NOTE: The stocks reported herein are from mechanical trading model scans that are based upon moving average relationships, momentum and volume. DecisionPoint analysis is then applied to get five selections from the scans. The selections given should prompt readers to do a chart review using their own analysis process. This letter is not a call for a specific action to buy, sell or short any of the stocks provided. There are NO sure things or guaranteed returns on the daily selection of "Diamonds in the Rough."
Regarding BUY/SELL Signals: The signal status reported herein is based upon mechanical trading model signals and crossovers. They define the implied bias of the price index/stock based upon moving average relationships and momentum, but they do not necessarily call for a specific action. They are information flags that should prompt chart review. Further, they do not call for continuous buying or selling during the life of the signal. For example, a BUY signal will probably (but not necessarily) return the best results if action is taken soon after the signal is generated. Additional opportunities for buying may be found as price zigzags higher, but the trader must look for optimum entry points. Conversely, exit points to preserve gains (or minimize losses) may be evident before the model mechanically closes the signal.
Helpful DecisionPoint Links:
DecisionPoint Shared ChartList and DecisionPoint Chart Gallery
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
For more links, go to DecisionPoint.com