Courtesy of AllanTrends
By now most of you know the drill. Here is the set-up for a Wave Five Sell Signal on USO. Projections for the move are between 20-25. The leveraged ETF for Shorting USO is SCO.
USO Wave 5 Sell Signal Pending
Leveraged ETF’s
“An exchange-traded fund (ETF) that uses financial derivatives and debt to amplify the returns of an underlying index. Leveraged ETFs are available for most indexes, such as the Nasdaq-100 and the Dow Jones Industrial Average. These funds aim to keep a constant amount of leverage during the investment time frame, such as a 2:1 or 3:1 ratio.”
The two previous Market Close reports provided a basic understanding of how AllanTrends works and how it can be used in trading and investment. Returns, both positive and negative, can be doubled or tripled by use of leveraged ETF’s and options. Today is all about leveraged ETF’s. [Learn about options at Phil’s Stock World.]
Leveraged ETF’s can be illustrated as follows:
1x SPX = SPY;
2x SPX = SSO for LONG and SDS for SHORT;
3xSPX = UPRO for LONG and SPXU for SHORT.
In other words, if you want to exactly follow the return of SPX you buy or short SPY. If you want to double the return of SPX, you buy SSO for LONGS or SDS for SHORTS. If you want to triple the return of SPX, you buy UPRO for LONGS or SPXU for SHORTS. Remember, “returns” can be positive or negative, depending on accuracy in speculating in market direction.
I am not going to go through every index and their corresponding leveraged ETF. But here is a link that will do that:
http://etf.stock-encyclopedia.
There are sometimes more then one choice for a leveraged ETF for any one index. Always check the average daily volume (Yahoo Finance) and go with the higher volume choice.
My favorite leveraged ETF = TVIX. It is 2x the return of VXX, which itself is leveraged against the major market averages. There are also leveraged ETF’s for commodities, they are all included at the above link. Note that included on the Indices Stock Table to the far left are leveraged ETF’s for those major market averages.
The basic concept to increase returns by a factor of two or three times the index works. That’s good enough for me to use them almost exclusively in my trading.
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Here’s Allan’s table for several commodity ETFs which shows the symbol and the signal his system is currently generating. By Daily Reversal (in table) Allan means that if stock/index/ETF closes above the number, it is a BUY and if it closes below number is a SELL.- Ilene
Elliott Wave International is offering a free report on Technical Indicators, click on the box below.
