Bull/Bear vs Base vs Index (% Change Spread)

Visualizes the performance gap ("Beta Decay") between 3x Leveraged ETFs (SOXL/SOXS) and their underlying sector (SOXX), relative to the S&P 500 (SPY).

This indicator is designed for traders who trade leveraged products (like SOXL/SOXS, TQQQ/SQQQ) and need to see true relative strength beyond simple price action.

It calculates the percentage change over a user-defined lookback period for four instruments:

Base (1x): The sector benchmark (Default: SOXX).

Bull (3x): The leveraged long ETF (Default: SOXL).

Bear (-3x): The leveraged inverse ETF (Default: SOXS).

Index: The broad market zero-line (Default: SPY).

It then plots the Spread to reveal the health of the trend:

Bull Spread (Green Line): Bull % - Base %

Bear Spread (Red Line): Bear % - Base %

Base vs Index (Filled Area): Base % - SPY %

🧠 The Logic: Why Use Spreads?

In a perfectly efficient trending market, a 3x Bull ETF should move exactly 300% of the underlying asset. However, in choppy or volatile markets, volatility decay (beta slippage) causes leveraged ETFs to underperform mathematically.

Positive Spread: The leveraged ETF is successfully capturing momentum (The "Sweet Spot").

Negative Spread: The leveraged ETF is suffering from drag or the underlying asset is chopping.

📈 Recommended Trading Plan

Note: This indicator works best as a filter for entry conditions, not a standalone signal. Always use proper risk management.

Strategy A: The "Clean Trend" (Momentum)
Goal: Enter a 3x position only when volatility drag is minimal.

1. Bull Signal:

Condition 1: The Base vs Index (Area) is Green (Sector is outperforming SPY).

Condition 2: The Bull Spread (Green Line) is Positive (> 0).

Why: This confirms the sector is strong AND the 3x ETF is amplifying that move efficiently without decay eating the profits.

2. Bear Signal:

Condition 1: The Base vs Index (Area) is Red (Sector is lagging SPY).

Condition 2: The Bear Spread (Red Line) is Positive (> 0).

Why: This confirms the sector is crashing and the Bear ETF is successfully capturing the downside momentum.

Strategy B: The "Decay Avoidance" (Cash is King)
Goal: Avoid leveraged funds during chop.

Condition: If BOTH the Bull Spread and Bear Spread are Negative (< 0) (below the zero line).

Action: Stay in Cash or trade the 1x underlying (SOXX) only.

Why: When both spreads are negative, it mathematically proves that the market is too choppy for leverage. Both the Long and Short leveraged funds are losing value relative to the underlying asset.

Features:

Pine Script® v6: Updated for the latest engine performance and visuals.

Dashboard Table: Real-time percentage spreads displayed directly on the chart (customizable position).

Fully Customizable: Works on any sector (e.g., set inputs to QQQ/TQQQ/SQQQ for Tech).

Disclaimer:
Trading leveraged ETFs involves significant risk. This script is for educational purposes only.