New indicators

Over the past few months, I've been wondering if we might be able to use the new Ultra Short shares as trend indicators for the broader market. For those new to Ultra Shorts, the idea is that you get double the inverse movement of the index it tracks. Consider the Nasdaq 100. The Ultra Short gives 2x the QQQ's inverse. In other words, if the QQQ dips 1 point, the Ultra Short, symbol QID, should give you 2 points up.

I'm wondering if we could use this as a swing indicator of the QQQ itself. The problems are of course that the QID is double weighted, and that liquidity on the QID is ahort of total efficiency (I imgaine). On the other hand, the double weight might emphasize moves, making them more apparent. For instance, on the QQQ (left. Click for bigger view), there is no apparent pattern on the weekly chart, other than a possible breakdown of a shortterm trend.


Looking at the QID, it seems apparent that there is a breakout from a basing pattern, even perhaps a sloppy inverse Head and Shoulders, though the liqidity here plays a factor, since the rising and inconsistent volume brings the pattern into question, simply by by fault of the immaturity of the security itself.


I suppose one could even ask why that would be necessary, considering we have Point and Figure charts to give us a view of trend changes. True, and, looking at the Point and Figure charts for these two securities we see that they spotted the change in trend on the same day, Feb. 27th.

By using these indicators in tandem, we could spot shorter term indicators with the double inverse, and longer term trends with the QQQ P&F. Together, these indicators could help us buy and sell the QID for both short term and long term gains that would double the return (and loss) from the NDX 100.