Promised SQQQ Analysis

In this post I'm comparing the underlying, QQQ or NASDAQ 100 to the 3x leveraged ETFs, both long (TQQQ) and short (SQQQ), I am personally holding SQQQ along with SRTY (3x short IWM).

I have found over the years, quite often the leveraged ETFs will give signals sooner or stronger than the underlying, which I would assume is a function of the need to move faster because of the 3x leverage.

When I look at SQQQ's chart (I only included 9 as I didn't want this post to go on forever), I can't see a reason not to own it, even right here without a pullback and better entry, the overall position over a period of several months I would think would be lucrative enough that a few percent here or there on the entry would pale in comparison to missing the position, which is why, despite my desire to get some swing trades going "if" the signals make the risk/reward worthwhile, I'd still be loathe to give up what I consider to be a longer term trending position on the overall market that I intend to hold for some time.

*By the way, to the best of my knowledge, regulations just increased 3x leveraged ETF margin maintenance to 85% last week, so someone is expecting volatility ahead at the regulator level which makes sense considering NYSE margin debt and investor net worth (ability to meet margin calls).

Here are the charts, QQQ will be first in each timeframe followed by the 3x long, TQQQ which should look similar to QQQ, although you might notice signals are earlier or sharper and then SQQQ, the 3x short QQQ ETF which should look like the mirror opposite.

 QQQ 2 hour leading negative through stage 3 of the August cycle and the head fake move (yellow)

TQQQ 2 hour, essentially the same, note the strong 3C distribution through the large Stage 3 top and the head fake move.

SQQQ (3x short QQQ) with a strong leading positive divegrence as QQQ was at stage 2 as well as higher leading positive divergences since the head fake move in the broader market.

 QQQ 60 min going negative at stage 3 and worse at the head fake move.

TQQQ 60 min looking even worse.

However SQQQ has an amazing 60 min leading positive divegrence.

When I talk about looking for divergences, although we try to interpret whatever asset we are looking at,  these are the kinds of signals that shouldn't be ignored, these are the ones I call, "Jumping off the chart".

 30 min QQQ sharply leading negative since the market's head fake move.

TQQQ 30 min

And SQQQ 30 min. Even as we have seen some lower prices in SQQQ at certain areas, the divergence has been strong and growing. I believe these are not typical retail and these are strong hand shorts that aren't easily shaken out by new high headlines or strong 1-day moves that spook retail traders.

I can't see any good reason not to have exposure here to SQQQ long on a long term basis, although I like it a lot as a swing trade at the right areas as well, I'd just rather let this work for a year or so and I think we'll be very happy.