Long QLD or Short QID

This remains the question - Steven asked again and I will do my best to answer -

if in a long situation which would be better - short the QID or go long the QLD?

They are supposed to be mirror images but they are not -


They are close but the problem right now is that there just isn't enough data or experience with these two funds but right now the fact is the QLD has "longer legs" than the QID.

That would suggest that anytime you have an opportunity to buy QLD vs short QID you probably should and vice versa - I.E. if the occasion suggests being long QID you probably should short QLD. As an interesting aside - the actual short interest on QID is nearly 3 times that of QLD - so we need to go to the raw figures to work it out.

Putting aside expenses and fees associated with ETFs and shorting which will change the results a bit this is what I found using 5 different "long market" periods in the past 150 days -

QLD per share total returned 13.50 and short QID per share total returned 10.03.

This bears out the visual above (QLD having "longer legs") and suggests that people who short these two stocks really don't know what they are doing because they are shorting the wrong one.

Again - the sample size is too small to say with any conviction do this or do that. All I can say is that up till now it appears a long purchase of QLD when the market goes up and a short sale of QLD when the market goes down might be the appropriate way to go. A year from now the story may change significantly.

I hope that answers the question and I'm always glad to help out.

BOB - A Reprise

Bullish Jim mentioned that he made a little yesterday during lunch time playing QID and so I went to take a look. And indeed QID was in the BOB formation. That is annotated on this chart. And I’m repeating the methodology here both for any new readers and as an update for some of my old readers who may have forgotten the pattern.



Now that is the only way a BOB is defined. If you look at the three candles just before the three I used to describe it you can see a similar but not quite the same pattern. That is not a BOB - only similar - and you can see that the stock continued to go down. Only the real BOB has a 68% probability of a rebound. Of course this BOB had a bit more than that because of the fact that it had descended through the second support level.



That lends a whole new amount of probability to the possibility of a rebound (probability and possibility in the same sentence - what a weasel worder).

Then the third piece of goodness associated with this particular BOB was the fact that the RSI(2) was less than 2 and had been for awhile. That is indicated by the purple color of the candles. I set up Quote Tracker to color them purple when the RSI(2) was less than 2.

So here is a BOB that is supported by other pieces of technical analysis and if you saw it and didn't trade it you lost an amazing opportunity to make some cash.

One other point I'd like to make - BOB isn't TA - it is a "trader's observation" and there is a difference. Technical analysis is based on price manipulations in some manner such as RSI or Pivot Points or Moving Averages of whatever kind - the "BOB" on the other hand uses price in the raw as it is happening now. BOB then is more up to date than is most TA. When BOB is coupled with TA it becomes extremely powerful.

Defensive Funds

From Seeking Alpha - Defensive Funds: How Did They Fare During This Downdraft?

The bottom line of the article - they did lousy. The problem is the guy picked some mutual funds that you would have had to already be in and some obscure ETFs that I'm sure are household names in his house but not in mine. The ones that are household names around this place are shown in the following list with their Tuesday appreciation.

DOG 3.4%
PSQ 4.6
SH 3.8
QID 9.4
SDS 7.7
DXD 7.4

So if you are going to buy a "defensive fund" why not buy those that you know are designed for the situation and not "mutual funds" that must be purchased at least one day before the catastrophe. That's just stupid.

And all of us could have gotten into these defensive ETFs with room to spare - see my post here.

QID - RT 4

Thanks to Proshares even in a down market there are opportunities - I didn't see this one yesterday but if I had I would have jumped on it (I can't look at everything all the time).



You can see the 5th candle coming back to the EMA 4 and then the 6th candle takes off.

That would have been a great trade - sorry I missed it.

QQQQ and QID

In our never ending search for an automated let me sit back and watch and make money method, Dogwood and I are trying a number of approaches to using the Proshares ultra-short funds along with the Q's to see if we can find a market timing system that makes sense. Dogwood is right now studying the effect of TICK on the process and I'm looking at several other methods.

Including buy both and let one fail and one succeed. The best way to do that is to buy one or the other the night before depending on your feel for the market on the next day. If you believe the market is going up the next morning buy the Q's and set a stop close below them. If you believe the market is going down buy QID and set a stop below it. Usually at 3:45 EST you shouldn't have a lot of trouble getting filled because the day traders have all gone home for the day. (Except for a few hard core who play after hours). Then the next morning at the open you buy the other automatically also with a close stop and hope that the whipsaw of the market place doesn't take them both out. It happens. I've tried it a couple of times with success each time but I don't like the suspense.

Yesterday morning provided a great opportunity to try out a pivot point based approach because the Q's opened up and QID opened down. If you want to be prepared for the next day you have to generate the pivot points before the market opens - we've discussed how pivot points are generated so I won't cover that again.

Once you have generated the pivot points for the two stocks as soon as the market opens and you can get a one day chart you should bring it up and annotate it with the pivot point, MPH, MPL, R1, S1 or as much as will fit. Some systems provide this capability built in - mine doesn't but that's OK - I would continue to annotate them by hand as I have been doing all along. I enjoy doing it and it helps me concentrate on the task at hand.

Here is what the two stocks looked like at the end of the day.





You can see how they are an exact mirror image of one another and that they hit the pivot points at the same times. Note how you could have used the pivot point (1) of both stocks to inform your purchase. Then when the QID pulled back away from R3 and the Q's pulled away from S3 you sell QID and buy the Q's.

Thus in one day you make a buck and a half on QID and another 30 cents on the Q's. Dogwood suggests that we use QLD but I don't think it has enough volume yet to make it reasonable. But if you could have got a fill in QLD around 12:15 or so you would have made about a buck on the transaction.

I'll stick with the Q's for the counter trade in this instance until QLD becomes more popular.

A little memory trick so that you won't be buying the wrong ETF - QLD - "Long Double Q's", QID - "Inverse Double Q's".