Posts Tagged ‘ETF’

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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Presenting The TVIX: A Double Leveraged VIX ETF

Courtesy of Tyler DurdenPresenting The TVIX: A Double Leveraged VIX ETF

Ever feel like this market just does not provide enough unique and suicidal ways for you to lose your hard stolen money within nanoseconds of trade execution? Never fear – here comes the TVIX, a levered third derivative bet on volatility: simply said, the TVIX will be the world’s first double leveraged VIX ETF. According to the ETF creator, VelocityShares, "the TVIX and TVIZ ETNs allow traders to manage daily trading risks using a 2x leveraged view on the S&P VIX Short-Term Futures™ Index and S&P 500 VIX Mid-Term Futures™ Index, respectively, while the XIV and ZIV ETNs enable traders to manage daily trading risks using an inverse position on the direction of the volatility indices. The indices were created by Standard & Poor’s Financial Services LLC, a division of the McGraw Hill-Companies, Inc." Then again, why not just call these what they are: a novel way (brought to you via the synthetic CDO legacy product known as ETFs) to lose money with a 99.999% guarantee. As always, we wonder why anyone would trade this product, when, with much better odds, one would at least get comped in Vegas…

Here is the full product suite about to launched by Credit Suisse.

One has to love the fine print:

The ETNs, and in particular the 2x Long ETNs, are intended to be trading tools for sophisticated investors to manage daily trading risks.  They are designed to achieve their stated investment objectives on a daily basis, but their performance over longer periods of time can differ significantly from their stated daily objectives.  Investors should actively and frequently monitor their investments in the ETNs. Although we intend to list the ETNs on NYSE Arca, a trading market for the ETNs may not develop. 

In this case, and as in everything else related to the market, our advice is stay away from these synthetic contraptions which are merely CDOs (and now CDOs cubed) for public consumption. On the other hand, we can’t wait for someone to finally release an ETF or any other mechanism, that allows for the simple shorting of GM stock. 


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Sector Detector: InfoTech Holds Lock on Top Ranking

Sector Detector: InfoTech Holds Lock on Top Ranking

By Scott Martindale, Senior Managing Director, Sabrient

Norway, Hallingdal,  Aal, Kulufossen, waterfall, long exposure

The stock market is searching for direction, testing support and resistance levels each week. After threatening a waterfall decline last week, it instead found support and has rallied strongly. Today, the S&P 500 and Dow Jones Industrials joined the Nasdaq 100 and Russell 2000 by rising above the important 200-day moving average. However, they all remain below their 50-day moving averages.

I like to define trends in simple terms. So, when a stock or index is above both its 50-day and 200-day moving averages, I consider it to be in a bullish trend. Likewise, when below both its 50 and 200-day, I consider it to be in a bearish trend. When it is between the two, the market is searching for direction. Recapturing the 200-day was important for fighting off what appeared to be the start of a new bear trend. It shows that there is some buyer support for this market.

Market volatility represented by the VIX has settled back to around 25, which is right at its 50-day moving average and still well above its 200-day moving average. Keep in mind that the VIX tends to move opposite the market, so finding support is typically bearish for the market. We should know soon how this is going to play out.

The SectorCast-ETF model employs a fundamentals-based multi-factor approach including forward valuation, earnings growth prospects, recent analyst consensus sentiment, and various return ratios. Like the technical picture, current quant rankings reflect an uncertain outlook.

Latest rankings: Information Technology (IYW) continues its lock on the top ranking with a score of 71, but this Financials (XLF) has taken back the second spot after falling into a tie last week with Healthcare (XLV). Overall, sector scores are quite similar to last week despite the big market rally from the edge of the abyss.

Notably, Consumer Discretionary (XLY) and Materials (XLB) have both weakened somewhat this week. Also worth mentioning is that Energy (XLE) and Materials (XLB) were the only sectors to get hit with more analysts reducing earnings estimates rather than increasing.

IYW fares the best in the percentage of analysts increasing earnings estimates, and it ranks high in return on…
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Gold Chart (GLD)

GLD

Courtesy of Allan

I wrote to my subscribers last night about GLD; that it is on a fresh Buy on the Daily chart and is in Buy Pending mode on the Weekly chart.  That longer-term Weekly Buy should be confirmed by today’s close. Below is a GLD 240 minute chart:

The most recent Buy on the chart came on April 20th at 111.93.  With GLD up above 115 today, that is about a 3% rise from inception of the trade.  Taking a look at the option tables, a 3% rise in near-term at the money calls translates into a pro-forma rise in the option of well over 100%, i.e. from about $2.07 to between $4.00 and $4.85:

That’s a healthy return for a ten-day period.  But it has to be, as the trade has to make up for the previous whipsaw, where I suspect a loss on the option would be about 30%.  Adding it all up,  assuming that for any given two trades there is a 30% loss followed by a 100% gain, at the end of the year you are addicted to the trend models.  

A lot of assumptions here, including pro-forma and/or hypothetical analysis.  But the underlying trading paradigm is not assumed, it is real and based on this rear-view mirror option analysis, is a viable strategy going forward.  Daily and Weekly models offer similar opportunity and I’ll eventually get around to posting this same kind of analysis for those time frames. 

Allan’s newly launched newsletter, “Trend Following Trading Model,” goes with the trend-following trading system he’s been working on for years. Most trades last for weeks to months. Allan’s offering PSW readers a special 25% discount. Click here. For a more detailed introduction, read this introductory article. – Ilene 


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E! True Hollywood Story: The Rise and Fall of SKF

E! True Hollywood Story: The Rise and Fall of SKF

Courtesy of Damien Hoffman at Wall St. Cheat Sheet

SKFSatire-TThis is a guest post by Joshua Brown at The Reformed Broker.

The ProShares Ultra Short Financial ETF, otherwise called SKF, has had one of the most spectacular flame-outs in market history.  One minute, SKF was a superstar, raking in millions of dollars on a daily basis and dominating the most actives list.  Then suddenly, the party was over.This is the E! True Hollywood Story of SKF, Star of the Credit Crisis.February 2007Baby SKF is born on a wintry day at the ProShares HQ in Bethesda, MD.  Just like his inverse twin, UYG, SKF was born at $70 per share on the American Stock Exchange.

SKF: I started shorting banks like, immediately.  In fact, I was ultra shorting them, predominantly through the use of swaps contracts as opposed to outright short sales.  Bank of America, Citi, Goldman…you name ‘em, I was short ‘em.

July 2007SKF was in the right place at the right time from day one.  In the midst of an overheating stock market, Bear Stearns came out in the middle of July with the admission that two of it’s internal sub prime hedge funds were in trouble.

SKF: This was my first big break.  Even though I wasn’t short a lot of Bear stock, I knew I was onto something big.  Every morning, my agents would email me clippings of mortgage-backed securities stories from the media.  The rest of the bank and broker stocks started getting jittery and I was getting hooked on the volatility, big time!

 February 2008SKF celebrated it’s first birthday amidst a Dow Jones that had already lost 2000 points from it’s peak.  SKF was flirting with $100 per share and the momentum traders had just started showing up at it’s party.

SKF: The scene was intense, man.  The StockTwits guys started tweeting about me like crazy and I was all they could talk about on the Yahoo Finance message boards.  People all over the market started to hear my name.  I ain’t gonna lie, it felt good.  Felt like I was important.  So what that Bear Stearns was about to be shuttered and that the foreclosures were starting to get rolling.  I was gonna be famous!

September 2008The drizzle of financial distress has now become a tsunami as Lehman…
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USO Oil Fund – All of the Drops, Only Some of the Gains

USO Oil Fund – All of the Drops, Only Some of the Gains

For the past two weeks we've been shorting USO on and off and it's been very entertaining.

We all know that most ETFs are a total scam as they use a system called "creation units" to deliver shares to market WITHOUT changing the net asset value of the underlying assets of the fund.  Because the funds are front-loaded (or front-unloaded) with cash during the day, professional arbitrators have a field day buying or shorting the underlying stocks or commodities that the ETFs MUST buy to "square up" their positions at the end of a day.  Effectively, ETFs allow professional investors to pool the money of small investors into one, easy-to-manipulate target that follows pre-defined rules they can trade against.

In the case of USO, which has always underperformed oil by a wide margin, the divergence is so bad and the flaws in the fund are so vulnerable to attack by the already manipulative NYMEX crowd, that oil expert Stephen Schork has labeled it a pyramid scheme:    

So how is this like a pyramid scheme? A pyramid scheme is funded by a constant flow of dollars into the venture by new investors. The second investor knowingly and willingly pays the first investor on the assumption he will get paid by the third investor… and so on. It’s similar to a Ponzi/Madoff scheme, with the key difference, investors don’t know (or don’t want to know as long as those alleged returns keep rolling in) they are being scammed.

The USO is being funded by a proliferation of new retail investors looking to diversify into “alternative investments” (which as far as we have been able to ascertain, alternative investment is a euphemism for Las Vegas style bets on commodities by retail investors tired of watching their 401Ks drop). More importantly, these investors are obviously out of their league, i.e. taking buy-and-hold positions in a contango which raises their cost basis every month they roll into the higher priced deferred contract.

We assume they are buying the USO because they are bullish. But in a peculiar way, their actions could be helping to prevent the market from rallying. These new investors are not funding a pyramid per se, but they are helping to fund storage. That is to say, with


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Phil's Favorites

Legal cannabis vs. black market: Can it compete?

 

Legal cannabis vs. black market: Can it compete?

Brian Harriman, Cannabis NB president and CEO, displays some cannabis products at a Cannabis NB retail store in Fredericton, N.B., on Tuesday October 16, 2018. THE CANADIAN PRESS/Stephen MacGillivray

Courtesy of Michael J. Armstrong, Brock University

The Oct. 17 launch of legal recreational cannabis in Canada brings many challenges. Retailers are now worrying about possible product shortages or web site glitches. Governments are still debati...



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Zero Hedge

Philly Fed Finds Trump Tax Relief More Than Offsets Adverse Effect From Trade War

Courtesy of ZeroHedge. View original post here.

For all the concerns that Trump's trade war and tariff increases could jeopardize corporate capital spending plans, resulting in a broader economic slump, a Special Question posed by this month's Philly Fed survey found that this is not the case; in fact when taking into account Trump's tax relief/fiscal stimulus just the opposite picture emerges.

In Special Question #3 in the October Philly Fed survey, the regional Fed asks "...



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Digital Currencies

Blockchains won't fix internet voting security - and could make it worse

 

Blockchains won't fix internet voting security – and could make it worse

An e-ballot is less secure than one on paper. SvetaZi/Shutterstock.com

Courtesy of Ari Juels, Cornell University; Ittay Eyal, Technion - Israel Institute of Technology, and Oded Naor, ...



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Kimble Charting Solutions

Global Stock Market Indexes Flash Bearish "Look Alike" Patterns?

Courtesy of Chris Kimble.

Over the past several weeks, I’ve shared several examples of key stock market indexes and indicators hitting long-term resistance. Today, we’ll do the same… but with a much wider lens. We’ll look at 9 different stock market indexes in the developed markets that look concerning.

When a stock or market index hits resistance, it has three possibilities: 1) to break out above resistance  2) to move sideways / consolidate near resistance  3) to turn lower and pullback or correct.

In the 9-pack of charts below, we are seeing bearish “look-alike” patterns emerging. And in each case, it looks like the given markets are turning lower (point 1).

The markets considered include 6 U.S. indexes and 3 European, including the S&P 500(NYSEARCA: SPY), ...



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Insider Scoop

10 Stocks To Watch For October 18, 2018

Courtesy of Benzinga.

Some of the stocks that may grab investor focus today are:

  • Wall Street expects Philip Morris International Inc. (NYSE: PM) to report quarterly earnings at $1.27 per share on revenue of $7.15 billion before the opening bell. Philip Morris shares fell 0.07 percent to $84.50 in after-hours trading.
  • Analysts expect PayPal Holdings, Inc. (NASDAQ: ...


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Chart School

Weekly Market Recap Oct 14, 2018

Courtesy of Blain.

Wednesday and Thursday finally brought some fireworks to a very complacent market.   The S&P 500 had not had a 1% move in 74 days until Wednesday’s drawdown.

Rising yields were nailed as the culprit but months of rallying eventually require some sort of shake out – whatever the catalyst.  Wednesday’s sell off was the worst day for the S&P 500 since February and the worst for the NASDAQ since June 2016.

The market losses are “a reaction from investors finally realizing we are in a higher interest-rate environment, and given the elevated level of stocks, market participants were likely looking for a reason to sell,” said Charlie Ripley, senior investment strategist for Allianz Investment Management. “Higher interest rates typically bring on tighter ...



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ValueWalk

Vilas Fund Up 55% In Q3; 3Q18 Letter: A Bull Market In Bearish Forecasts

By Jacob Wolinsky. Originally published at ValueWalk.

The Vilas Fund, LP letter for the third quarter ended September 30, 2018; titled, “A Bull Market in Bearish Forecasts.”

Ever since the financial crisis, there has been a huge fascination with predictions of the next “big crash” right around the next corner. Whether it is Greece, Italy, Chinese debt, the “overvalued” stock market, the Shiller Ratio, Puerto Rico, underfunded pensions in Illinois and New Jersey, the Fed (both for QE a few years ago and now for removing QE), rising interest rates, Federal budget deficits, peaking profit margins, etc...



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Members' Corner

Why obvious lies still make good propaganda

 

This is very good; it's about "firehosing", a type of propaganda, and how it works.

Why obvious lies still make good propaganda

A 2016 report described Russian propaganda as:
• high in volume
• rapid, continuous and repetitive
• having no commitment to objective reality
• lacking consistency

...

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Biotech

Gene-editing technique CRISPR identifies dangerous breast cancer mutations

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

 

Gene-editing technique CRISPR identifies dangerous breast cancer mutations

Breast cancer type 1 (BRCA1) is a human tumor suppressor gene, found in all humans. Its protein, also called by the synonym BRCA1, is responsible for repairing DNA. ibreakstock/Shutterstock.com

By Jay Shendure, University of Washington; Greg Findlay, ...



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Mapping The Market

Mistakes were Made. (And, Yes, by Me.)

Via Jean-Luc:

Famed investor reflecting on his mistakes:

Mistakes were Made. (And, Yes, by Me.)

One that stands out for me:

Instead of focusing on how value factors in general did in identifying attractive stocks, I rushed to proclaim price-to-sales the winner. That was, until it wasn’t. I guess there’s a reason for the proclamation “The king is dead, long live the king” when a monarchy changes hands. As we continued to update the book, price-to-sales was no longer the “best” single value factor, replaced by others, depending upon the time frames examined. I had also become a lot more sophisticated in my analysis—thanks to criticism of my earlier work—and realized that everything, including factors, moves in and out of favor, depending upon the market environment. I also realized...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

...

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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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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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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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