The Smarter Leveraged ETF Strategy: Why We Wait for Cycle Confirmation

The Smarter Leveraged ETF Strategy: Why We Wait for Cycle Confirmation

As we step into June, the broader market continues to digest its intermediate cycle downturn. Both SPY and QQQ are working through what our models project to be an intermediate low around June 4. These pullbacks, though uncomfortable, are not unexpected. In fact, some of the sharpest down days historically occur just before a cyclical bottom. This volatility, especially in leveraged ETFs like SPXL and TQQQ, magnifies the psychological challenge—but also the opportunity.

We’re now five months into 2025, and the year-to-date (YTD) results are modest at face value:

• SPY (S&P 500): +0.87% YTD

• QQQ (Nasdaq-100): +1.69% YTD

But those who’ve used leveraged ETFs as passive, buy-and-hold instruments are still seeing red:

• TQQQ: -11.28% YTD

• SPXL: -9.94% YTD

That’s because leverage cuts both ways. Without timing, amplified exposure becomes amplified pain. And that’s where the smarter leveraged ETF strategy begins—by trading in sync with cycles rather than sitting through them.

Why Structure and Cycles Matter More With Leverage

Most investors misunderstand the risk-to-reward equation in leveraged ETFs. They assume that if the underlying index goes up over time, a 3x version should simply triple the gain. But the reality of compounding, volatility decay, and path dependency tells a different story. Without a strategy to navigate the dips, long-term holders often underperform—or worse, get wiped out during drawdowns.

Our Cycle Signals system was built to address exactly that. It doesn’t seek to predict tops or bottoms. It identifies where we are in the rhythm of the market and offers high-probability inflection points. These signals—marked by green arrows on the chart—highlight where a cycle is expected to turn up.

But structure is our confirmation. If those arrows align with a basing price pattern, a crossover of short-term moving averages (like 3/5 or 2/3), or a reclaiming of price channels, then we act. If they don’t, we stay patient. That filter is what prevents overtrading and makes the strategy durable, especially when using leverage.

Real-World 2025 Performance: SPXL vs. TQQQ With and Without the Strategy

Let’s compare.

• SPXL (buy-and-hold): -9.94% YTD

• TQQQ (buy-and-hold): -11.28% YTD

Now, using the Cycle Signals system with selective execution:

• SPXL (with cycle strategy): +0.01% YTD

• TQQQ (with cycle strategy): +54.75% YTD

That’s the power of discipline. These aren’t theoretical models in a vacuum. These are signals executed with structural confirmation, showing what’s possible when traders don’t simply follow the market—they respond to it.

Buy Stops: Our GPS for Re-Entry

Instead of rushing to "buy the dip," we place buy stops just above resistance levels. This ensures we only enter if the market proves its strength with follow-through. Buy stops also remove emotion from the decision. When the market triggers them, it means structure has turned in our favor—and that’s when we want exposure.

It’s a simple rule: let the market prove itself. Especially in leveraged instruments, guessing is fatal. A buy stop above a prior swing high or above a 5-day price channel is a mechanical way to enter when confirmation shows up. And if the trend resumes, we ride the wave. If not, we stay safe.

This method gives us not just a tactical entry, but also psychological clarity. We’re no longer in a reactive state, wondering if the market is done dipping. The market tells us. That precision is especially critical in volatile environments, where emotional decisions can lead to oversized losses. Check our post on Swing Trading for Beginners: Why Structure Always Leads the Story for more info.

The Importance of Patience and Sequence

Not every signal deserves action. That’s why we wait for cycles to bottom and begin turning upward. When the summation of cycles is declining, even a green arrow gets ignored. That restraint allows us to avoid buying into weakness or becoming overly aggressive in sideways markets.

When patience aligns with structure and confirmation, we go from theory to execution. We don't just trade because we can; we trade because the market says it's time. And in 2025, that discipline has created massive divergence between those still holding underwater leveraged ETFs—and those following the smarter plan.

People Also Ask About Leveraged ETF Strategy

What makes leveraged ETF strategies risky?

Leveraged ETFs magnify both gains and losses, making them highly sensitive to short-term market swings. Without a structured strategy, investors can quickly lose capital during volatile periods. These ETFs reset daily, so holding them without a tactical plan exposes you to compounding decay and amplified drawdowns. The ability to benefit from leverage depends entirely on precision—being early or late to enter can drastically change the outcome.

How does cycle confirmation improve leveraged ETF performance?

Cycle confirmation tells us when the broader market rhythm is turning in our favor. When leveraged ETFs are traded in sync with these cycles—especially when structure confirms with price holding above moving averages—entries become higher quality and exits more deliberate. This alignment improves consistency and reduces false starts. It’s not about catching every move—it’s about catching the moves that matter most with the highest conviction.

Can buy-and-hold ever work with leveraged ETFs?

It can—but only in strong, persistent uptrends with low volatility. In most market environments, buy-and-hold strategies in leveraged ETFs underperform due to compounding issues. Timing entries and exits around cyclical turns is a more sustainable approach for these instruments. Even during long-term bull markets, intermediate corrections can cause sharp setbacks. That’s why a more dynamic, timing-based approach is better suited.

What tools should be used to trade leveraged ETFs?

Steve’s philosophy avoids overly complex indicators. Instead, it focuses on cycle models, crossover averages (2/3, 3/5), and price channels. These simple yet powerful tools help traders spot structure, confirm direction, and define risk—ideal for volatile instruments like SPXL and TQQQ. Rather than reacting to lagging signals, these tools help identify early setups in alignment with broader cycles.

Why do some leveraged ETF trades fail despite a strong signal?

A strong signal without confirmation can lead to premature entries. Sometimes, the cycle may be bottoming, but price hasn’t yet responded. Waiting for structure—such as a price breakout or moving average crossover—helps avoid fakeouts and improves success rates. It’s this added layer of confirmation that creates the edge. Even strong setups require the patience to wait for alignment.

Resolution to the Problem

Leveraged ETFs require more than just conviction—they demand structure, timing, and restraint. While the buy-and-hold crowd in TQQQ remains underwater, traders using Steve’s smarter strategy are seeing double-digit returns. The key difference? Discipline. By aligning trades with both the cycle signal and price structure, we stack the odds in our favor.

More importantly, this isn’t about hitting home runs every time. It’s about consistency. It’s about knowing when to stay in cash and when to step in with size. That flexibility helps mitigate drawdowns and gives us confidence to hold through confirmed upside. In a market full of noise and rapid swings, structure gives us clarity and control.

Join Market Turning Points

Market Turning Points gives you daily access to actionable cycle commentary, structural signals, and market insights. If you’re tired of guessing and want to align your trades with the natural rhythm of the market, come join us. Learn how structure and discipline can transform your outcomes at www.stockforecasttoday.com.

Members also gain insight into historical analogs, upcoming reversal dates, and intra-week commentary that help build context and conviction. Whether you’re trading SPY, QQQ, or leveraged ETFs like SPXL and TQQQ, the tools and training inside MTP can help sharpen your edge.

Conclusion

The smarter leveraged ETF strategy isn’t about prediction—it’s about preparation. When price aligns with cycle lows, and structure turns up, we strike. Until then, we wait.

This patient, data-driven approach allowed us to outperform in TQQQ this year while others struggled. And it will continue to guide us forward—not because we’re certain, but because we’re disciplined. That’s the edge we carry into every trade.

In the long run, it’s not the fastest trader or the most aggressive strategy that wins—it’s the one with structure, patience, and the willingness to follow the rhythm of the market. Let others guess. We’ll wait for the signal.

Author, Steve Swanson