Earlier this year at the end of April, silver and it’s exchange traded funds iShares Silver Trust (SLV) began to launch their booster rockets and go “parabolic” trader parlance for a vertical move upwards. The relative strength index (RSI) during that period peaked around 89. Silver hit all time highs of $50, and created a topping tail or reverse hammer, a very bearish indicator and then swan dived 20%.
The fundamentals behind gold’s price action are different but in some ways the same. Gold has been in a strong uptrend for well over a year now. The reasons for this continuously positive trend are varied, a weakening dollar, fear in the markets etc. New language has entered the lexicon of investors, credit default and debt rating downgrade. These two hugely bearish terms have become catalysts for much fear and panic in the equity markets. The results of which are extremely volatile down days that have erased all of the gains of 2011.
When in fear, people run to the exits (as many have) or they run to safe havens, such as gold. Read More…
By Raghu Gullapalli, SmartStops.net contributor
If you are not aware of the all consuming political debate about the U.S debt ceiling that has consumed the country, then you’ve more than likely been living in a cave. Our distinguished representatives have debated the possibility of increasing the national debt and solving future deficit problems ad nauseum. Surprise, surprise we are no closer to a solution with four days to go to the deadline then we were four months ago. Unfortunately our bloviating leadership does not realize the tremendous real life consequences of this political drama.
Aside from the embarrassment of the possibility defaulting on our financial obligations as a country for the first time, there is the almost assured downgrade of our national credit rating. This downgrade may well cripple any chance of a recovery in our economy and will have cataclysmic affects in the worldwide equity markets. What does that mean for investors? Any fond memories of 2008?
For traders like me, that would involve shorting the financials, industrials, the dollar index or anything with interest rate exposure and hedging myself by buying gold, oil and going long the iPath S&P 500 VIX Short-Term Futures ETN (VXX). But for the average investor, Financial Armageddon: Part Deux.
iStockAnalyst thinks there is a probability of ”60% that sideways is the most likely outcome” of the NASDAQ. “Until the index breaks resistance at 2700 or falls through support at 2600, both levels are likely to act like bumper car rails”. In their view, “ the biggest July fireworks show will come from second quarter earnings and forward guidance, July’s GDP and Employment Situation reports. The trio will determine which way we go with great clarity”.
Thus they suggest a following potential plays on leveraged ETFs off the NASDAQ:
“With the market’s direction truly a flip of the coin to start the week, iStock thinks the prudent thing to do is buy a double or triple leveraged NASDAQ ETF when the index approaches support at 2610-2620ish. Sell it and buy an inverse double or triple leveraged NASDAQ ETF as it heads towards 2690. Of course, should the index start the week in the green, just turn the trading strategy upside-down and start with the short ETF first.
Leveraged ETFs that trade in the same direction as the NASDAQ:
2X NASDAQ ETF: ProShares Ultra QQQ (QLD)
3X NASDAQ ETF: ProShares UltraPro QQQ (TQQQ)
Leveraged inverse ETFs that trade in the opposite direction of the NASDAQ:
2X inverse NASDAQ ETF: ProShares UltraShort QQQ (QID)
3X inverse NASDAQ ETF: ProShares UltraPro Short QQQ (SQQQ)
SmartStops wants to remind you that when taking on a more risky play as leveraged ETFs, it is imperative that you maintain proper stop loss protection. Remember too that SmartStops does produce datapoints for ETFs that are short.