After my first recommendation a couple weeks ago I began to worry that, once again, I was on the wrong track. But I stayed the course and I hope you did too. Stocks rallied a bit aggressively after Tuesday the 6th, common in bear markets of course, but still disconcerting to us bears. It does have to end at some point.
However, inflation numbers came out stronger than expected (Consumer Price Index – August 2022 (bls.gov)) which sent us right back into a free fall. The exodus is slow, so the VIX refuses to push past 28 or so. So although we approach oversold conditions, I am hanging on to most of my SQQQ position.
| Style | Recommendation 9/4 | Open $ 9/6 | Current | VIX |
| High-Risk Investors | Buy PSQ (Short QQQ ETF) | 13.57 | 13.81 | 26.14 |
| Higher Risk | Buy QID (Short x2 QQQ ETF) | 22.92 | 23.60 | |
| Highest Risk | Buy SQQQ (Short x3 QQQ ETF) | 47.34 | 49.12 |
More News
Good news is bad news continued on Thursday with solid unemployment report (News Release (dol.gov)). Bad news is bad news continued on Friday with FedEx’s pre-announcement of terrible earnings which could presage the same across multiple industries this coming period.
Given the fed meeting is this week and there doesn’t appear to be any good news on the horizon (for bulls, anyway), we could see the VIX spike above 30 at which point I would recommend paring the position. The leveraged ETFs need to be actively managed / traded. They cannot be held indefinitely and will lose you money over the long term regardless of the market (more on that in another post).
Although we are seeing pessimism on the extreme end of the scale (suggesting the possibility of a counter-trend rally), lack of capitulation tells me this has farther to go on the downside.
Happy trading.