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Investor Activity In TQQQ Point To Higher Prices For It And The Market

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This is travel up to our October 11th article connected NASDAQ:TQQQ, Current TQQQ Metrics Still Indicate A Bear Market Bottom. At clip of that publication TQQQ was $18.23. It is presently $24.05, up 37%. Internal investor metrics successful TQQQ look to constituent to moreover higher prices for nan market. This is confirmed by signals from our maestro sentiment parameter Market Sentiment And A Bear Market Elliot Wave Flat (NDX), which are besides pointing to higher agelong word prices. However, nan existent antagonistic rate travel successful TQQQ does bespeak accrued short word risk.

While marketplace indications stay bullish agelong term, because of accrued short word risk, we urge intermediate and agelong word investors successful TQQQ return profits and trim consequence by buying an scale money pinch little leverage.

Using ProShares Investor activity arsenic marketplace indicators

We usage investor activity successful ProShares leveraged ETFs much arsenic indicators for nan marketplace than whether that money is nan champion conveyance to profit from those indications. In different words, from past history investor activity successful TQQQ mightiness bespeak higher prices for nan wide market. This would hap because nan activity successful nan ETF is typical of what investors are besides reasoning elsewhere. It doesn’t ever mean, however, that nan money itself is needfully nan champion conveyance to return advantage of nan indicated move. That depends much connected nan clip sky of nan investor.

Even though investor activity successful TQQQ mightiness springiness a semipermanent marketplace signal, TQQQ itself is designed much for investors who person very short word clip horizons. So, scale costs pinch little leverage, aliases nary leverage astatine all, should astir apt beryllium utilized for longer word horizons.

Warning

Even though we deliberation existent investor activity successful TQQQ points to a higher banal market, location are ample risks utilizing TQQQ to effort to profit from it. The consequence of nonaccomplishment successful TQQQ grows nan longer 1 holds nan fund. The pursuing informing astir utilizing highly leveraged ETFs is provided by Proshares, nan money sponsor.

ProShares UltraPro QQQ® (the “Fund”) seeks regular finance results, earlier fees and expenses, that correspond to 3 times (3x) nan return of nan Nasdaq-100® Index (the “Index”) for a azygous day, not for immoderate different period. A “single day” is measured from nan clip nan Fund calculates its nett plus worth (“NAV”) to nan clip of nan Fund’s adjacent NAV calculation.

The return of nan Fund for periods longer than a azygous time will beryllium nan consequence of its return for each time compounded complete nan period. The Fund’s returns for periods longer than a azygous time will very apt disagree successful amount, and perchance moreover direction, from nan Fund’s stated aggregate (3x) times nan return of nan Index for nan aforesaid period. For periods longer than a azygous day, nan Fund will suffer money if nan Index’s capacity is flat, and it is imaginable that nan Fund will suffer money moreover if nan level of nan Index rises.

Longer holding periods, higher Index volatility, and greater leveraged vulnerability each exacerbate nan effect of compounding connected an investor’s returns. During periods of higher Index volatility, nan volatility of nan Index whitethorn impact nan Fund’s return arsenic overmuch arsenic aliases much than nan return of nan Index.

The Fund presents different risks than different types of funds. The Fund uses leverage and is riskier than likewise benchmarked costs that do not usage leverage. The Fund whitethorn not beryllium suitable for each investors and should beryllium utilized only by knowledgeable investors who understand nan consequences of seeking regular leveraged (3x) finance results of nan Index, including nan effect of compounding connected Fund performance. Investors successful nan Fund should actively negociate and show their investments, arsenic often arsenic daily. An investor successful nan Fund could perchance suffer nan afloat worth of their finance wrong a azygous day.

One should besides publication this elaborate connection from nan SEC connected nan risks inherent successful leveraged ETFs: Message from SEC connected leveraged ETFs.

TQQQ NAV

TQQQ ETF is simply a highly leveraged, volatile fund. Its NAV since inception is shown successful nan floor plan below.

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Long Term NAV of TQQQ (Michael McDonald)

As nan chart shows, from nan debased successful March of 2020 to nan precocious astatine nan extremity of 2022, nan value of TQQQ went from $9.17 to $86.77. This is simply a summation of 946%. From that precocious to nan debased successful 2022, it declined 79%. Its presently up 37% from twelvemonth extremity low.

TQQQ Shares Outstanding

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Shares Outstanding successful TQQQ since inception (Michael McDonald)

The floor plan of shares outstanding successful this money shows that, successful nan past, investors successful TQQQ person shown very bully marketplace timing. Peaks successful stock outstanding hap erstwhile much investors are entering nan money past leaving and they look to hap astatine awesome value lows arsenic indicated by nan achromatic arrows. The existent number of 510,050 shares, while down from nan caller highest successful January, is still acold supra past levels. If history is simply a guide, we judge nan ample summation successful shares outstanding that occurred successful January signals that a awesome marketplace debased has formed.

Total Assets Under Management - TQQQ

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TQQQ Assets nether guidance (Michael McDonald)

TQQQ is nan largest money successful nan ProShares family and, pinch $12.3 cardinal successful assets, it accounts for 17% of nan money family. The truth that full assets didn't diminution complete nan past six months erstwhile prices did is suggestive of much investors entering nan money than leaving, which historically we cognize is positive.

Buying levels successful TQQQ

We person different measurement of measuring investor buying by measuring nan dollar magnitude of regular buying successful TQQQ arsenic a percent of full assets. It's presently 37.8%. A debased number is 20%. The highest number complete nan past 12 years was 100%. The existent number intends that buying levels successful TQQQ confirms what nan shares outstanding metric is indicating – that prices are astir apt headed higher.

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Daily bargain levels successful TQQQ arsenic percent of assets (Michael McDonald)

TQQQ rate flow

While buying levels successful TQQQ proceed high, trading levels person accelerated. So overmuch truthful that nan nett rate travel into nan money is now negative. Apparently, galore traders are either taking profits aliases limiting losses aft buying higher. This is graphically shown successful nan floor plan below.

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Net Cash travel into TQQQ complete past forty days (Michael McDonald)

Takeaway

We deliberation this antagonistic nett outflow of money indicates an accrued consequence of little prices. Because of this we judge longer word investors should return profits successful TQQQ and acquisition an scale money pinch little leverage and little risk. Short word investors successful TQQQ tin stay but must beryllium fresh to limit losses should nan marketplace and money reverse and commencement down.

This article was written by

Michael James McDonald floor plan picture

Michael James McDonald is simply a banal marketplace forecaster, writer and erstwhile Senior Vice President of Investments astatine what is now Morgan Stanley. He is simply a semipermanent advocator of nan mentation of contrary sentiment and nan measurement of investor sentiment erstwhile forecasting value direction.His first book, " A Strategic Guide to nan Coming Roller Coaster Market" was published successful June of 2000, 3 months earlier nan apical of nan dot comm market. On its screen was written, "How a caller exemplary of nan banal marketplace predicts nan extremity of nan 18-year bull marketplace (1982-2000) and nan opening of a caller era." The "new era" was to beryllium a semipermanent (roller coaster) trading scope market, which did materialize betwixt 2000 and 2009.Then, connected August 31st, 2010, successful a SA article titled: "The 10 Year Trading Range Is Over - The 'Final Stampede' Has Begun", he called an extremity to this trading scope marketplace and nan opening of different semipermanent bull market, which besides came about. Through his institution nan Sentiment King, he continues to study and do what he loves - investigation and effort to successfully forecast awesome banal trends - and thief others spot them too.

Disclosure: I/we person nary stock, action aliases akin derivative position successful immoderate of nan companies mentioned, and nary plans to initiate immoderate specified positions wrong nan adjacent 72 hours. I wrote this article myself, and it expresses my ain opinions. I americium not receiving compensation for it (other than from Seeking Alpha). I person nary business narration pinch immoderate institution whose banal is mentioned successful this article.

Editor: Naga



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