ETFs, Buy Signals And Building An ETF Portfolio

Perennial Quentinvest favourite and original Top 50 constituent, QQQ3, a three-times leveraged Nasdaq 100 tracker which performs with even greater volatility because of daily rebalancing, has a sensational chart. Anything can happen over a period of days or weeks, but in the longer term, this ETF is headed miles higher as it tracks the greatest equity boom in the history of the Galaxy. Nothing small about what is happening to US equities in the 21st century, which will surely be known to historians as the dawn of the digital era.

What we can see more clearly on a shorter-term chart is the volatility of QQQ3. A buy signal is given when the moving averages bunch and then turn higher.

I am not showing a weekly candlestick chart, but because QQQ3 is so volatile AND in a strong secular uptrend, you could play this game with weekly moving averages. Buying into buy signals means that when QQQ3 falls sharply, as it does periodically, instead of bewailing your losses, you can celebrate the exciting buy signal that you know is coming. Meanwhile, my feeling is that QQQ3 is in fill your boots territory, but I have been saying that for a while.

I added QQQ3 to the Top 50 portfolio on 26 June, and already it is up over 52 per cent.

There are three other ETFs in the Top 50 portfolio: QQQ, which is the unleveraged version of QQQ3 and is rebalanced quarterly, TECL, which is a full-on technology ETF, and XLK, which is the unleveraged version.

I am so intrigued by what is happening to ETFs in this bull market and the excellent performance they are delivering that I am launching an equivalent of my Top 50 list for ETFs. The initial constituents will be all the above plus SOXX, an ETF tracking the performance of the Philadelphia Semiconductor, SOXL, a leverage version of SOXX, FNGS and FNGU, a 3x leveraged version of FNGS.

FNGS is something else. The constituents are listed below.

A variant of FNGS is MAGS, the Roundhill Magnificent Seven ETF. The constituents are the usual suspects, Nvidia, Microsoft, Alphabet and co. The chart is flying.

To get my ETF index off to a flying start, I am going to include my Top 50 ETFs at their recommended prices in that portfolio. The others will go in on today’s date.

Share Recommendations

QQQ3

QQQ

TECL

XLK

SOXX

SOXL

FNGS

FNGU

MAGS

Strategy – Build An Exciting ETF Portfolio

In an ideal world, you would buy all these shares (FNGS and FNGU are actually ETNs), but given ridiculous nanny-state regulations, it may not be possible to do that. If you only buy QQQ3 that should not be a bad result.

The main argument for buying these ETFs is that they are driven by the endless uptrend in the Nasdaq 100, which in turn is driven by the incredible vigour of the US economy, which itself rests on the efforts of 340m Americans to do something exciting with their lives. Unlike in nanny state, taxed-to-death, big state Britain, they are encouraged in their efforts by a government which believes in shareholder capitalism and accepts that in any human society there will be winners and losers.

A compassionate country will offer a safety net to all its citizens, but that is a world away from using taxes and out-of-control welfare spending to equalise not just opportunities (we could all applaud that) but also outcomes (a doomed strategy otherwise known as the dead hand of the state).

As demonstrated by the victory of some Plaid Cymru no-hoper in Wales, British politics is becoming Reform v the rest. Tactical voting on a massive scale may be the only thing which could deny Reform a Commons majority in the next election, but even that may not be enough. British voters are seriously fed up and ready to vote for anyone who has not been responsible for the political-economic car crash of recent decades.

Kemi Badenoch does finally seem to be seeing the writing on the wall with her promise to abolish stamp duty, which would have an electrifying effect on the housing market and maybe even the whole British economy. Britain needs to be a high-energy tax haven. It seems so obvious to me as to be a no-brainer, or is the politics of envy so entrenched? If that is the case, make sure that future tax measures (cuts) benefit everybody. Make sure every voter has something to applaud (except for the bureaucrats and the welfare cheats; unfortunately, they are part of the problem and need to find work in the private sector).

I guess you can tell I studied Politics, Philosophy and Economics at University. Anyhow, my subscribers and I are in the private sector, so we know what we want and it ain’t Kier Starmer, let alone Plaid Cymru or this new lunatic, Zack Polanski, running the Green party. I agree the Green Party has an opportunity to become a more significant force, as does any party which is not Labour or the Tories, but they have nothing of merit to offer the country. Pious hand-wringing is not going to stop global warming, but technology might.

The collapse of the Tories and the imminent collapse of Labour means that the vast majority of voters in the UK are what are sometimes described as floating voters, up for grabs. At the moment, Reform looks poised to sweep up most of this floating vote, but these are uncertain times. If Kemi could totally reinvent the Tories as a small state, low tax, party of enterprise and promise a raft of concrete, exciting measures (multiple taxes abolished or slashed and a chainsaw to the size of the state with whole departments ceasing to exist), maybe she could regain the initiative. Does she have the balls, to coin a phrase? Who knows? Thatcher did, and it worked for her. Sometimes, nothing to lose can concentrate the mind.