Decline to Resume After Short Term Rally

Published on May 8 , at 6:25 AM Pacific Time
DJI and SPY completed their first leg down yesterday morning . This leg was completed in 5 smaller steps  starting on Friday May 2nd and completing on Wednesday morning, May 7. This is being followed by second leg  up which will end  late today or tomorrow- most probably tomorrow . This will be followed by a much bigger decline in third leg down.
Nasdaq ,QQQ and Russell 2000  ( IWM) have been much weaker than DJI & SPY since early March. They are rallying  today and tomorrow in conjunction with  DJI and SPY. This market is very fractured  and much weaker than what most of the analysts are telling you on TV.

Gold  gave a SELL signal  yesterday and is heading much lower  with minor rallies in between.

DJI

SPY

SPXL 3X  SPX  ETF Long

SPXS

IWM

TZA  3X Bear on Russell 2000 or IWM

TNA 3X Bull on Russell 2000 or IWM

QQQ

SQQQ  3X Short QQQ

TQQQ 3X Long QQQ

GLD GOLD ETF gave a SELL signal yesterday morning

GDX Gold Miners Gave a Sell signal yesterday morning

NUGT 3X long Miners Gave a SELL signal yesterday morning

DUST  3 X Bear on Gold Miners Gave a Buy signal yesterday 

VERY VERY IMPORTANT

Some of you like  to buy options on stocks rather than stocks themselves. This can be very profitable on a short term basis as long as you take frequent profits. This is specially true for triple leveraged long and short positions with a minor twist. Suppose you want to go short on a particular  ETF because you think  corresponding ETF  is going down. Then buy puts on 3X ETF which is long instead of buying calls on ETF which is short.  

Let us give an example or two. After this current rally is over by tomorrow or so, we expect Russell 2000  ( IWM)  to start going down again. TZA is the corresponding  3X bear. TZA goes up if IWM goes down while TNA goes   down . So normal tendency is to buy a call on TZA. Please do not do that. Instead buy a PUT on TNA. Over time TNA naturally has a tendency to go down and if Russell 2000 goes down , TNA Puts will go up even faster.

The opposite is true when market is going up . Buy the puts on TZA.

What kind of Puts you need to buy? The puts have to expire at least in two months. They should be IN The Money or at least At The Money. LET us say TNA is trading at  $68.5  today ( May 8, 2014) Then Buy   July 2014 Puts with a strike price of 69 or preferably 70.

Another Example

Suppose you think Gold is going down. So instead of buying calls on DUST (3X Bear), Buy PUTS on NUGT  ( 3 x Bull)

Let us say NUGT is trading at $35.21. Buy Puts on NUGT with a strike price of 36 or preferably 37 

with the put expiring in Sept. 2014  ( there are no puts for July or August)