The rule of 3 rings true for ETF SPXU. After 39 weeks and 3 tries it has broken out and close above a massive down trend line. With Euro concerns, the flash crash and slowed US growth still in the back of most traders minds, any rally in the S&P is suspect. This SPXU break gives credence to the notion that a bear market is beginning.
With more and more companies guiding down it's no wonder investors are weary. After watching the tape this week I say I'd have to agree. Yet I sold SPXU on Wednesday morning looking for a technical pop. I wanted to see if the major indexes could close above their 200 day moving average. The Nasdaq took back and held it's 200 day line on 5/27 making 5/28 the second day it closed above it. But the other indexes got rejected. This isn't particularly troubling since the Nasdaq has been the leader since the rally began, it's no surprise that it would hold first. Next week I will be looking for the other indexes to follow the and close above the 200 DMA at least two days in row. This will signal the long term uptrend is still intact.
As for the SPXU I'll be looking at the SPX volume and market action going into the close. It's important to buy right when trading anything, but it's multiplied by three when dealing in the SPXU. I've gotten burned on more than one occasion trying to jump the gun on the SPXU. So we must be sure this is the start of a bear market and not just a normal market correction.
Judging from the Nasdaq it's still time to buy, We'll see if the other indexes will come back and confirm this.. Until next post watch the tape, trade the tape, and trade well!!
