Saturday, August 7, 2010

Stock Market Downdrafts on the Way - DRV, EDZ, FAZ, LHB, SKF, TYP

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Just for a change of pace and to practice my skills on something other than mining stocks, I decided to take a hard look at about 100 Exchange Traded Funds (ETF) and see how the market looks going into next week.
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The ETF's with the most compelling setups were invariably those with a bearish bias.  So I have got to imagine there will be some downdrafts in the stock market this week.  
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This first chart is Direxion Daily Real Estate Bear 3X (DRV).   Now if I were to buy this one in the upcoming week, the 60 minute chart (not shown - but you can make your own at FreeStockCharts) would have to show me a new attitude.  At the moment, the True Strength Index (TSI) indicator says price will continue lower, at least initially, on Monday.
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Click on the charts to ENLARGE
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This second chart is Direxion Daily Emerging Markets Bear 3X (EDZ).   This one needs to move higher at least 5% just to fill a little gap left open from 5 or 6 days ago.    The hourly TSI looks pretty good so if I saw price and the TSI turn north after the open, I would be inclined to buy.








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This third chart is Direxion Financial Bear 3X Shares (FAZ).  Believe it or not, I have a true aversion to having anything to do with trading anything related to the financial stocks.  Call it a bad attitude on my part, I guess.  That sector seems so incredibly rigged that I just refuse to screw around with it.  But for the reader with a better attitude than mine, this could be worth keeping in mind.
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The hourly TSI charts says downside momentum will  be a problem on Monday.  To buy this I would have to see the hourly chart get it's act together.  If FAZ trades down to $13.00 fairly quickly, that will put a nice positive divergence in place and I could be a buyer of that.
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This fourth chart is Direxion Daily Latin Amer Bear 3X (LHB).  The hourly chart on this one has been strengthening for 5 days now and I would be kinda surprised if price holds still much longer.
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This fifth chart is ProShares UltraShort Financials (SKF).  I guess this chart is a second look at (FAZ) - as they are both essentially the same thing - financials.  The SKF 60 minute chart, like FAZ, would not inspire me to buy right away on Monday.  But if the $19.20 price gets taken out quickly, there should be an excellent positive divergence in place and a buy would probably work out very well.
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And finally, the sixth chart is Technology Bear 3X (TYP).  Like so many of the others above, the 60 minute TSI would not encourage an immediate purchase of this.  If/when the 60 minute has either a trend line break or a significant positive divergence in place, THEN this could be a very nice BUY.
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To wrap up my little exercise session, I would suggest the stock market could be in for some bouncing around this week.  I would not have the immediate confidence to buy any of these 6 on the open Monday, unless perhaps the market opens with a very significant gap to the upside.  Even then, I would definitely give it careful thought.  I do however think if a person monitored these 6 this week, there would be good opportunities to make 5-10% on any one of them.

2 comments:

  1. Price erosion in leveraged ETF's is pretty bad.

    http://seekingalpha.com/article/127365-leveraged-etfs-handle-with-care

    I hope you won't hold them for more than a couple days.

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  2. Yeah, the 5-10% I may attempt to make on any one of these would definitely be a surgical technical maneuver, not a buy and hold until Christmas type of thing.

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