Posts Tagged ‘DIG’

An update on oil proxies

Courtesy of Jean-Luc Saillard

Back in December, I wrote a post on my blog where I compared the performances of various ETFs related to the oil industry. I was looking for the best possible proxy to match the moves of oil prices if you didn't want to play with futures. At the time, I concluded that for medium term trades, USO and the leveraged ETFs UCO and SCO were the most promising. Longer term, broader ETFs like OIH and XLE might make better investment if oil prices do recover to more profitable prices since ETF linked to futures like USO, UCO and SCO do suffer from decay. It also seemed that DIG and DUG could be promising if OIH could recover as it should with the price of oil, but that they don't make a good proxy for the price of oil itself. 

Since then, oil has hit a multi-year low at around $42.50 and is now approaching $60, still well below its highs of 2014 but probably closer to a breakeven price for American shale producers. In this post I want to see what ETF would have profited best from that rebound and also which one would have fared worse. Let's look at a couple of performance charts. First, the standard oil proxies based on the futures:

Oil (red) is up 40% since March 17 but what is interesting is how the pure oil ETFs are tracking that move. USO (blue) which is not leveraged is not tracking very well. In fact, it's up only about 27% or about 2/3 of the oil move. As expected, SCO (pink) is down, but clearly, the leveraging is not the 2x that you would expect as it's only down a bit less than 40%. And UCO (green), while the clear winner here, is only up 57% which is lower than the advertised 2x leverage factor. Once again, these future based ETF are victims of some decay.

Let's look at some ETFs not based on oil futures but who should benefit from an oil price rebound. In the next performance chart, we'll look at OIH and XLE. 

It's not surprising that there should be a lag between the time oil prices start…
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Q2 Buy List – Rounding Out The Top 20 (Members Only)

Finally a chance to buy again! 

The problem with hitting the dead bottom with our June 7th Buy List is there haven't been any good entry opportunities since for new Members.  Now we are back down to about the bottom of the "flash crash" (S&P 1,065) and it does look like we may be forming another bottom. right about where we were when I wrote on June 6th "The Worst-Case Scenario:  Getting Real With Global GDP!" where I pointed out:  Things are just simply not bad enough to sit on our hands with a big pile of cash

I am still not advocating going over a 25% commitment to long-term positions so PLEASE - keep that in mind at all times - our buying premise is that we have cash (with a target of staying at least 75% cash right now) and we will need more disaster hedges if we can't hold this week's lows.  If we have a 2% hedge in place now that pays 10% on a market drop of no more than 20% below where we are now, then we can expect to have 10% of our money from that hedge to pay for any stocks that are put to us and, if we are only allocating 20-25% of our cash to buy round 1 here, then logically, that extra 2% we're putting up as insurance will pay for half of an unexpected drop.  If we get less confident in holding our levels, then we can up our hedges.

That means, if we spent $25,000 to buy round 1 of stocks and $5,000 of insurance that pays 500% if we hit our assignment area (down 20%) and we are assigned a basked to stocks, which force us to double down, then the $25,000 we need to double down with will come from our insurance hedge and that means we'll be in 2x the stock for $30,000 with $75,000 more cash on the side (assuming it was a $100K Virtual Portfolio). 

Let's keep this example dead simple and say we buy the SPY for $106.82 and let's say we buy 300 shares for $32,000.  Now we cover that with the sale of the March $103 calls for $12 and the $95 puts for $6 and that nets out to $88.82 ($26,346) and our upside at $103 is $14.18 ($4,254 or 13%).  We are committed to owning 600 shares of SPY at the $88.82 we paid
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Monday Monetary Meltdown – Sill the EwRo!

Oh what a World, what a World

It's funny how much damage a splash of cold water can do, isn't it?  Especially when that splash of cold water is reality and the witch is fiat currency.  You are very, very lucky because I do not have to rant on about this for 2 pages here because I already told people this was going to happen in March of 2007, when I warned that rising oil prices were indicating a serious issue with fiat currencies and would eventually undo our then-indestructible rally.  The title of that post was "Are We Heading for an Economic Tornado?

The Dow was just above 12,000 at the time but, to an old fundamentalist like me, it seemed a little pricey and my dire warning at the end of the article sounds more like a recap of the last 3 years now when I said:

If we manage to topple the entire house of cards that is commodity pricing, perhaps we won’t need sub-prime mortgages to buy ourselves affordable housing at realistic interest rates.  There is certainly a storm brewing as a vacuum of money has been left in our heartland as the Broker/Commodity/Financial triumvirate has funneled $6T away from you and the things you enjoy (consumer goods) to force you to spend it to maintain the things you need (cars, tractors, appliances).  They’ve created a storm that threatens to tear the global economy apart.

As I've said many times, I don't have the power to fix things (but, if appointed dictator for life, I will serve) – I can only tell you what's going to happen and how to profit from it.  At the time we were buyers of gold, looking to ward off a probable slide in the dollar and what looked like inevitable inflation.  Now we are sellers of gold because, in this post-crash Gobal economy – who can afford it?  Sure speculators can afford it but just like houses or oil (or tulips for that matter) – eventually they have to find a real buyer.  Did you know gold demand is plunging in Asia?  What?   They didn't tell you that in any of the 100 TV commercials?  I am shocked… 

Actually, I can tell you the easiest way to time the gold market – count the number of commercials from people who want to buy your gold vs the…
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Pick: Ultra Proshares Oil and Gas ETF (DIG)

[For a free subscription to Phil’s Stock World, click here - it’s easy, no credit card required]

Pick: Ultra Proshares Oil and Gas ETF (DIG)

Courtesy of David at the Oxen Group 

DIG - Oxen TradeThe Oxen Group, for Thursday, is optimistic to hope for a good day from the market. Too many red days even in a bearish trend, means a correction every few days. Tomorrow, futures are already up as investors may be getting excited about jobless claims, which have been bullish for the past few weeks. Additionally, Research in Motion will be releasing earnings that are expected to be very positive for the tech sector and TARP paybacks were successful.

The market is due for a fundamental correction, as there are some bargains presenting themselves again. One of these is oil, oil service companies, and oil ETFs. After oil prices have slipped, with a late small gain today, oil may be ready for a move on Thursday. Gasoline wholesale prices have continued to slip, which is signalling a pullback in gas prices. Further, oil may get a boost from a very bullish Chinese inventory announcement that shows the Chinese economy is pumping again, helping to increase oil prices in the Asian market. We like Ultra Proshares Oil &Gas (DIG) to rally, with major holdings in Exxon and Chevron, which have both been hit with losses for the past four days. DIG has lost 13% in the past four days and moved down too quickly, presenting an opportunity for money to pour into the stock. If jobless claims are bullish and gas prices rescind, investors will push this stock up as inventories really did not get a chance to increase the oil market, which was a bullish indicator. Oil looks ready to rise, therefore, BUY DIG!

Entry: Recommend buying within first 10-25 minutes.
Exit: We recommend exiting after a 2-4% increase.
Upper Resistance: 30.50

David’s Oxen Trade Results:

Date  


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Zero Hedge

The Liquidity Crisis Is Quickly Becoming A Global Solvency Crisis As FRA/OIS, Euribor Soar

Courtesy of ZeroHedge View original post here.

One month after turmoil was unleashed on capital markets, when the combination of the Saudi oil price war and the sweeping impact of the coronavirus pandemic finally hit developed nations, what was until now mostly a liquidity crisis is starting to become a solvency crisis as more companies realize they will lack the cash flow to sustain operations and fund debt obligations.

As Bloomberg's Laura Cooper writes, cash-strapped companies are finding little relief from stimulus measures, and from Europe to the US, cash in hand has been hard to come by even...



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The Technical Traders

Adaptive Fibonacci Suggests Much Lower Prices Yet To Come - Part I

Courtesy of Technical Traders

Our Adaptive Fibonacci Price Modeling system suggests a much deeper price move is in the works and the current price rally will likely end near resistance levels identified by the Adaptive Fibonacci Price Modeling system.  We are posting this research post for friends and followers to help them understand the true structure of price and to allow them to prepare for what we believe will become a much deeper downside price move in the future.

Fibonacci Price Theory teaches us that price moves in waves within up and down price cycles. The recent peak in price, near February 25, 2020, has resulted in a very deep -36% price collapse in the S&P 500 (ES) recently. This dow...



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Phil's Favorites

Striking Amazon, Instacart employees reveal how a basic economic principle could derail our ability to combat the coronavirus

 

Striking Amazon, Instacart employees reveal how a basic economic principle could derail our ability to combat the coronavirus

Samuel Diaz, a delivery worker for Amazon Prime, loads his vehicle with groceries from Whole Foods in Miami. AP Photo/Lynne Sladky

Leigh Osofsky, University of North Carolina at Chapel Hill

A series of recent protests by the workers preparing and delivering our essential foods and other goods highlights a key risk to our ability to combat the coronavirus.

Some employees at an Amazon warehouse and Instacart “shoppers” ...



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Biotech/COVID-19

In the rush to innovate for COVID-19 drugs, sound science is still essential

 

In the rush to innovate for COVID-19 drugs, sound science is still essential

Employees work on the production line of chloroquine phosphate, resumed after a 15-year break, in a pharmaceutical company in Nantong city in east China’s Jiangsu province Thursday, Feb. 27, 2020. Feature China/Barcroft Media via Getty Images

Christopher Robertson, University of Arizona; Alison Bateman-House, ...



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ValueWalk

Coronavirus symptoms, causes, prevention and cure

By Jacob Wolinsky. Originally published at ValueWalk.

The best case situation for Coronavirus or COVID-19 is that in a few weeks it dies down and things get back to normal. However, we must entertain the possibility of a far more frightening scenario.

Warmer weather may not hurt coronavirus

April 8, 2020 Update: The number of coronavirus cases in New York State has now topped the number in Italy. New York Gov. Andrew Cuomo said 779 people died of COVID-19 in the state in a single day, marking the highest one-day death total from the virus. More than 6,200 people have died of the virus in New York, which Cuomo said is double the number of people who died there in the Sept. 11, 2001 terrorist attacks.

Many experts have been counting on the warmer months providing some relief from the coronavirus. However, a National Academies of Sciences panel told the White House t...



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Kimble Charting Solutions

Market Crash Reversal Patterns "Experiment" With History!

Courtesy of Chris Kimble

S&P 500 Index versus “Inverted” 30 Year Yield “monthly” Chart

Stocks and treasury bond yields had a wild (and scary) month of March as the financial markets crashed to new lows.

In today’s chart, we highlight this by looking at long-term “monthly” chart of the S&P 500 Index versus an “inverted” 30 Year US Treasury Bond Yield.

Note that inverting charts offers a different perspective and reduces bias. For more on this, ...



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Chart School

The Big Short movie guides us to what is next for the stock market

Courtesy of Read the Ticker

There is nothing new in WallStreet, it is only the players that change. Sometimes a market player or an event gets ahead of the crowd and WallStreet has to play catch up.

Previous Post Dow 2020 Crash Watch Dow, Three strikes and your out!

It is important to understand major WallStreet players do not want to miss out on a money making moves.  







...

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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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Members' Corner

10 ways to spot online misinformation

 

10 ways to spot online misinformation

When you share information online, do it responsibly. Sitthiphong/Getty Images

Courtesy of H. Colleen Sinclair, Mississippi State University

Propagandists are already working to sow disinformation and social discord in the run-up to the November elections.

Many of their efforts have focused on social media, where people’s limited attention spans push them to ...



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Digital Currencies

While coronavirus rages, bitcoin has made a leap towards the mainstream

 

While coronavirus rages, bitcoin has made a leap towards the mainstream

Get used to it. Anastasiia Bakai

Courtesy of Iwa Salami, University of East London

Anyone holding bitcoin would have watched the market with alarm in recent weeks. The virtual currency, whose price other cryptocurrencies like ethereum and litecoin largely follow, plummeted from more than US$10,000 (£8,206) in mid-February to briefly below US$4,000 on March 13. Despite recovering to the mid-US$6,000s at the time of writin...



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Promotions

Free, Live Webinar on Stocks, Options and Trading Strategies

TODAY's LIVE webinar on stocks, options and trading strategy is open to all!

Feb. 26, 1pm EST

Click HERE to join the PSW weekly webinar at 1 pm EST.

Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

This week, we also have a special presentation from Mike Anton of TradeExchange.com. It's a new service that we're excited to be a part of! 

Mike will show off the TradeExchange's new platform which you can try for free.  

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Lee's Free Thinking

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

 

Why Blaming the Repo Market is Like Blaming the Australian Bush Fires

Courtesy of  

The repo market problem isn’t the problem. It’s a sideshow, a diversion, and a joke. It’s a symptom of the problem.

Today, I got a note from Liquidity Trader subscriber David, a professional investor, and it got me to thinking. Here’s what David wrote:

Lee,

The ‘experts’ I hear from keep saying that once 300B more in reserves have ...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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