How these new ETFs can energize your portfolio
Since last Thursday’s big advance the market has
failed to make any progress. The most likely scenario in my mind is that the
move last week was an overreaction. Large institutions were going to do their
absolute best to push the market higher going into the 1st half close and the
Fed helped provide an excuse for a rally. Now that the 1st half is over and the
holiday is passed it will be interesting to see if the good feeling persists.
I’m still not seeing much evidence to make me believe this rally is for real. If
it is, there will be plenty of time to play it by trading in leading stocks
breaking out of proper bases. Very few proper bases have set up. Over this past
weekend I did find a fair amount of stocks that appeared to be forming the right
side of potential “cup†formations. They should begin completing their bases in
the next week or so. If I am wrong and this rally is for real, these potential
new leaders are where I will be looking to get long. If I’m right, we should see
a new leg down begin in the next few weeks. For now I’m still patient and
bearish.
Today I thought I would talk a little about some ETFs that have begun trading
recently. They are the ProShares Trust ETFs. There are two groups, leveraged and
inverse ETFs. The leveraged ETFs are designed to have their results correspond
to two times their underlying index. The inverse funds are designed to have
their results correspond to the inverse of those indices. The four indices that
are available in both groups are the Nasdaq 100, S&P 500, S&P 400 and Dow 30
Industrials.
For people that actively trade their IRA who could not easily execute short
strategies or utilize leverage (without options), these ETFs may provide
attractive opportunities. Previously many traders had to trade their IRA
significantly different than their margin account. These funds will allow
traders to trade cash and IRA accounts in a much more aggressive manner.
Additionally, an advantage to using inverse ETFs as opposed to outright shorting
is that you can’t lose more than you lay out on the trade.
If you want to learn more about these funds, checkout
www.proshares.com.
Good trading,
Rob
For those who may be
looking to expand their knowledge beyond just market timing, my
Hanna ETF Money Flow System utilizes the VIX in
generating trading signals for spread trades.
Rob Hanna is the principal of a money
management firm located in Massachusetts. He has spent the last several years
developing and refining methods for trading in stocks across multiple time
frames. He selects stocks using both fundamental and technical criteria, and
then trades them using technical analysis techniques.