I have been aggressively long the $SPY and $QQQ using leveraged ETFs since they both broke above the 50 day sma. I also took $IWM long at the break out to all time highs. I have been holding $SPXL $TQQQ $TNA & $SPY for great returns on capital in February. I am still very bullish on equities but as a swing trader of the long term trend.
Here are the seven reasons I went to cash in my trading account this morning.
- As stock indexes have entered the 65-70 RSI reading they have lost momentum. Each day is now a struggle to go from red to green.
- After the run off the lows the risk/reward is now becoming skewed against long positions. There is more risk at these price levels than reward.
- The odds are that there will be a chance to get in on a pull back for a better entry and cost basis.
- Apple is now back below the 70 RSI and this was the third day of $AAPL setting a lower high and a lower low. These are the first signs of a potential trend reversal or trading range developing as the up trend fades. This effects $QQQ negatively.
- $SPY set a lower high and a lower low. It lost the 5 day ema in the morning and had trouble getting back to green. This is the second day of a red candle. $SPY has gone virtually nowhere since Monday.
- $SPY & $DIA stayed red while $IWM and $QQQ rallied. This is a divergence that will have to resolve itself and the odds are on down or sideways from here.
- The $VIX has stopped going down. Increasing volatility is a warning sign as the trading range expands.
I will be waiting to buy the dip but this slow motion grind upwards has become not worth the risk for such a limited upside to the 70 RSI if it gets there and the growing potential for a pull back.