The SPDR S&P 500 ETF Trust (SPY - Get Report) and PowerShares QQQ Trust ETF Series 1 (QQQ - Get Report) have been quite volatile since setting fourth-quarter 2018 highs. My call is to sell strength in the stock market as Spiders trade up to the second quarter risky level at $297.56. My prior call was to buy QQQs on weakness to its annual value level at $169.27, which was tested on June 3.

Most on Wall Street say "nobody can time the market," but I say you can! You do so by reading daily and weekly charts and knowing the key levels and signals that provide guidelines on when to sell on strength and buy on weakness.

Investors remember the pain of the December decline that turned on a dime on Dec. 26 for Spiders and Dec. 24 for QQQs? The charts will show a buy signal from these lows. Both had strong rallies as 2019 began with highs set on May 1. Both declined and set lows on June 3.

On Thursday, Spiders set an all-time intraday high while QQQs did not. The daily and weekly charts show how investors can capture major portions of this extreme up and down volatility and make money.

In sum, since the fourth quarter of 2018, the markets have had wide swings. From fourth-quarter highs, Spiders and QQQs fell by 20% or more to Dec. 24 or Dec. 26 lows. This was followed by bull market gains of 20% into May 1, when the theme was "sell in May and go away," and declines were between 10% and 20%. The annual value level held for QQQs at $169.27 on June 3 and this week Spiders approached its second-quarter risky level at $297.56.

The Daily Chart for Spiders

Courtesy of Refinitiv XENITH

The daily chart for Spiders shows a bear market decline of 20.4% from the Sept. 20 high of $293.94 to the Dec. 26 low of $233.76. The technicals turned on a dime on Dec. 26 with a daily "key reversal" when the close of $246.18 on Dec. 26 was above the high of $240.84 on Dec. 24. This signal indicated that 2019 would begin with a positive market for stocks. The close of $249.92 on Dec. 31 was an important input to my proprietary analytics and its annual level remains in play at $285.86. The 200-day simple moving average was a buy level at $277.32 between May 29 and June 4. Above the chart is the second-quarter risky level at $297.56.

The Weekly Chart for Spiders

Courtesy of Refinitiv XENITH

The weekly chart for Spiders is positive, with the ETF above its five-week modified moving average at $287.28. SPY is well above its 200-week simple moving average or "reversion to the mean" at $243.57, after this average held at $234.71 during the week of Dec. 28. The 12x3x3 weekly slow stochastic reading is projected to end this week at 60.54, up from 52.26 on June 14. At the May 1 high, this reading was 96.14, above 90.00, so Spiders were in an "inflating parabolic bubble" and the bubble popped.

Trading Strategy: Buy weakness to the 200-day simple moving average at $277.33 and reduce holdings on strength to the second-quarter risky level at $297.56.

The Daily Chart for QQQs

Courtesy of Refinitiv XENITH

QQQ set its all-time intraday high of $191.32 on May 1 and its second-quarter risky level is above the chart at $194.29. The ETF is above its 200-day simple moving average at $174.26 and its annual value level at $169.27. On Dec. 26, as Spiders held its 200-week SMA at $234.71, I predicted that a bear market rally would begin for both Spiders and QQQs. The close of $154.26 on Dec. 31 was an important input into my proprietary analytics and its annual value level remains at $169.27. This key level held at the June 3 low.

The Weekly Chart for QQQs

Courtesy of Refinitiv XENITH

The weekly chart for QQQs is positive with the ETF above its five-week modified moving average at $182.88. QQQs is well above its 200-week simple moving average or "reversion to the mean" at $142.18. The 12x3x3 weekly slow stochastic reading is projected to end this week rising to 56.27 up from 50.42 on June 14. Note that when QQQ set its all-time intraday high of $191.32 on May 1 this reading was 96.64, putting the ETF in an "inflating parabolic bubble," which was a warning to "sell in May and go away." This bubble has popped, and its annual value level held at $169.27 on June 3.

Trading Strategy: Buy weakness to its annual value level at $169.27 and reduce holdings on strength to its second-quarter risky level at $194.29. If Spiders test its second-quarter risky level at $297.56, you can consider reducing holdings on QQQs.

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How to use my value levels and risky levels:

Value levels and risky levels are based upon the last nine weekly, monthly, quarterly, semiannual and annual closes. The first set of levels was based upon the closes on Dec. 31. The original semiannual and annual levels remain in play. The weekly level changes each week; the monthly level changed at the end of January, February, March, April and May. The quarterly level was changed at the end of March. My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility investors should buy on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before its time horizon expires.

The close on June 28 is the second most important for 2019. This close is an input to my proprietary analytics and will generate new weekly, monthly, quarterly and semiannual levels.

How to Use 12x3x3 Weekly Slow Stochastic Readings:

My choice of using 12x3x3 weekly slow stochastic readings was based upon back-testing many methods of reading share-price momentum with the objective of finding the combination that resulted in the fewest false signals. I did this following the stock market crash of 1987, so I have been happy with the results for more than 30 years. The stochastic reading covers the last 12 weeks of highs, lows and closes for the stock. There is a raw calculation of the differences between the highest high and lowest low versus the closes. These levels are modified to a fast reading and a slow reading and I found that the slow reading worked the best. The stochastic reading scales between 00.00 and 100.00 with readings above 80.00 considered overbought and readings below 20.00 considered oversold. Recently I noted that stocks tend to peak and decline 10% to 20% and more shortly after a reading rises above 90.00, so I call that an "inflating parabolic bubble" as a bubble always pops. I also call a reading below 10.00 as being "too cheap to ignore."

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.