And the Rally goes on!!

The Beat Goes On!

Yeah.. I know.. it's cheeky!! But it's what came to mind when I titled this post.. ;0)

Bear Market rallies are SHARP and often powerful enough to make one believe that a new bull market is impending that will take us to new highs. Heck, even I get

But what the CNBC pundits don't discuss is that we've been in a major bear market since 2008. The 83% rally we've had since Mar, 2009 was NOT a bull market, but a bear market rally. But some bozo decided to "reset the clock" and call it a bull market.

Maybe I'm strange, but I don't consider it a bull market until I'm relatively assured that there is more upside than downside, and we're trending toward taking out previous historical market highs.

So we've had over 400 points on the DOW added in the past 3 days. We're back above 10,000, and the S&P 500 is trading over the H&S neckline for the second day. Should we be bullish? Was this really the "Mother Of All Bear Traps" and the shorts are about to get scorched? Or is this just the eye of the storm and we're about to catch it from the other side of the financial hurricane?

I wish I could answer that. I really wish I could. And if I could determine the ultimate direction of the market, I'd be charging you for this advice in a private market newsletter.. ;0)

But again.. Technical Analysis of markets is like a windsock, not a crystal ball. All I can do is provide "risk/reward" scenarios. But the guy from Perfect Stock Alerts remains bearish and demonstrates some clear logic for his case:

PSA July 8th market read

And here's a longer market take from Dan Fitzpatrick who is ALSO a very competent Market Technician:

Dan Fitzpatrick market read

I had someone IM me last night on Yahoo out of the blue, wondering what direction the market was going to take, and mentioning that he he was down 10% on TZA, and Ultra-Bear ETF inverse to the Russell 2000 smallcap index. I truly felt sorry for him, as well as not being able to indicate how much more "pain" he was likely to feel holding that ETF. They are incredibly volatile and generally not for anything but a daytrade, or in certain circumstances, a short-term swing-trade. I have also learned the painful lesson of trying a "buy and hold" tactic on these inverse ETFs and one position took several weeks to become profitable again.

So let me attempt to address the current situation on some of these ETFs. I may have some screenshots from my trading platform available to annotate to this post tomorrow, so be sure and visit this post again for update data and charts. But for now I'll rely upon Bigcharts, which isn't perfect, but adequate to get the message across.

First... TZA:

TZA on my trading platform showed some INCREDIBLE DISTRIBUTION today. A very long brown volume spike, indicating selling. But when I looked at TNA, it did not show the same kind of positive volume spike. It could possibly be due to the fact that some folks lacking trading platforms with realtime charting were unable to deal with the 1 for 5 reverse that occurred in TZA, DRV, and TYP (and other Direxion 3x Ultra-Bear ETFs). Bigcharts is having this problem and it will be at least 10 days before I can get a good chart on the hourly timeframe.

Here is a screenshot from my trading platform for July 8th, Daily Chart. This one has traditional 30, 50, and 200 Day MA lines (color identified at upper left):

Notice the Parabolic SAR trending upward (blue dotted line) and the price at appox $36.00?  TZA is quite likely to hit that "tick" and cause the SAR to "flip" downward starting from 45.66. Also, if you backtest the results of when a daily SAR is "flipped", you'll note that more often than not, the price will continue to decline to the next level of support which could be around $32-33/share, where the lower Bollinger Band arm is currently located.    Now I don't expect TZA to actually get down to that level.  It's likely that we'll see it flip, have  a quick minor sell off and then begin the grind back up to the descending SAR line.   SAR lines are like "magnets" for price movements.   Prices will tend to trend back to the SAR line.

Now.. the OTHER possibility is that TZA sells off to the 50 Day MA at around $36 and then soars to new highs, thereby creating an even HIGHER Parabolic SAR "reset" (which would clearly demonstrate the uptrend is resuming (and the Russell 2000 furthering it's decline).

Now.. back to that volume spike..    Do you see it?    But TNA, the Ultra-Bull ETF does not reflect a major accumulation spike.    So I wonder how this reverse split is creating a volume divergence and whether that will result in higher prices for the Ultra-Bull ETFs.

Now.. in the hourly chart, we're seeing the 200 HOUR MA sitting at around $37.70.. This is a MUST HOLD to avoid trending downward, and it should be good for a short term trading opportunity for $1-2 price swing up to the lower Bollinger Band at around $39. But the last candlestick on the hourly chart was NOT a "hammer", which suggests we have further selling to go in the morning (which means TNA and the RUT will likely be up).

And look at the descending Chalkin's money flow.   It's declining, and it generally goes negative red when it hits the "neutral zone".   That indicates we have more pain for TZA.

Bottom line.. the selloff in TZA did a hell of a lot of technical damage to the chart. And that reverse split didn't do it any good either. And when I look at the daily chart of TNA, I don't see much resistance until $40/share for that Ultra Bull ETF. Since TZA is the inverse, it will likely suffer from this advance in TNA.

BTW, did I mention that the 60 minute TZA chart indicates a "Bear Flag" formation? That's usually not bullish.

Right now I'm playing FAS and some in DRV and DRN. Banking coin, but a bit frightened to leave a position overnight (I did leave my DRN in place tonight, but I'll be restless.. ;0)

This is a trader's market. And I like being able to bank 2-3% on my positions each day and sleep peacefully.

But these ETFs are not for the weak of stomach. The odds are that if you find yourself underwater in one of them, eventually you'll get bailed out. But if the Bears lose the game and this turns into a serious short squeeze, there is nothing but pain for the Ultra-Bears lying ahead.

Scrutinizer