Category Archives: oud

7 Ways To Short Crude Oil Now

Crude oil has had a wild ride this year. It seemed every day in January, oil was making new lows before it bottomed in early February at $26.05.The last five weeks have been the opposite, with almost every day a green day for the black gold. Crude oil futures looked to have finally topped out at $42.49 earlier this week, before pulling back under $40.00 yesterday. Now it looks like shorts sellers of crude and oil related companies have a solid entry where they can start short positions. Both the commodity and oil stocks look to trend lower into earnings season and risk can be realized with stops at the highs of the year. Oil is due for a sell off and it wouldn’t be a big surprise if we saw a pullback to the $34-35 area sometime soon. While the pullback starts to form, investors can profit from a fall in oil by buying the ETFs below. In late January, I had a bullish view in oil that can be found here . In the write up, I suggested getting long various oil bull ETFs and a few oil stocks. If that advice was followed I would suggest taking profits, then waiting for another chance to get back in at lower prices. ETF/ETNs to short Crude oil VelocityShares 3x Inverse Crude Oil ETN (NYSEARCA: DWTI ) – This ETN is an investment that seeks to replicate, net of expenses, three times the opposite (inverse) of the S&P GSCI Crude Oil Index ER. The index comprises futures contracts on a single commodity and is calculated according to the methodology of the S&P GSCI Index. DWTI is a very volatile product that allows bearish oil investors to maximize their gain. If oil falls 5% in a day, this ETN will rise 15%, maximizing the bearish bet that is made. DWTI will pull back fast when oil heads higher, so I only encourage short-term trading with this instrument. ProShares UltraShort Bloomberg Crude Oil ETF (NYSEARCA: SCO ) – This investment seeks to provide daily trading results that correspond to twice (200%) the inverse of the daily performance of the Bloomberg WTI Crude Oil SubindexSM. The “UltraShort” Funds seek daily results that match (before fees and expenses) two times the inverse (-2x) of the daily performance of a benchmark. Very much like DWTI, this will move higher as crude oil moves lower. If oil is at $40 a barrel and falls to $39, we would see a 5% move higher in SCO reflecting the 2.5% move in crude lower. The main difference between SCO and DWTI is what magnitude, higher or lower, a trader is looking for. ETFs to short oil and gas companies Direxion Daily Energy Bear 3X Shares ETF (NYSEARCA: ERY ) – This ETF is an investment that seeks daily trading results, before fees and expenses, of 300% of the inverse of the performance of the Energy Select Sector Index. The fund creates short positions by investing at least 80% of its assets in swap agreements, futures contracts, options, reverse repurchase agreements, ETFs, and other financial instruments that, in combination, provide inverse leveraged and unleveraged exposure to the index. ERY is the same concept as DWTI, except the shorting aspect looks to focus on actual energy companies rather than crude oil futures. This might benefit a trader if he wants to go short a basket of energy stocks right before earnings season. The trader might be thinking that because of low oil prices, these energy companies will report negative earnings, leading to lower stock prices. This event would push ERY higher even if crude oil futures remained flat. ProShares UltraShort Oil & Gas ETF (NYSEARCA: DUG ) – The investment seeks daily investment results, before fees and expenses, that correspond to twice the inverse (-2x) of the daily performance of the Dow Jones U.S. Oil & GasSM Index. The index measures the performance of the oil and gas sector of the U.S. equity market. DUG will move in a similar manner to ERY, but a down move will only reflect twice the performance instead of three times. ProShares Short Oil & Gas ETF (NYSEARCA: DDG ) – This investment seeks daily trading results that correspond to the inverse (-1x) of the daily performance of the Dow Jones U.S. Oil & GasSM Index. The investment seeks daily investment results that correspond to the inverse (-1x) of the daily performance of the Dow Jones U.S. Oil & GasSM Index. DDG will move in a similar manner, but a down move will reflect the actual move instead of the leveraged gains that DUG and ERY have. A trader will utilize the above-mentioned instruments to short oil and gas stocks. They all offer different forms of risk and can be chosen depending on the trader’s willingness to accept risk. Other ETF/ETNs that will benefit Direxion Daily Nat Gas Rltd Bear 3X Shares ETF (NYSEARCA: GASX ) – This ETF seeks daily investment results, net of expenses, of 300% of the inverse of the performance of the ISE-REVERE Natural Gas IndexTM. Energy prices are typically correlated and move together. A move lower in oil will put pressure on natural gas prices, sending this ETF higher. iPath S&P 500 VIX ST Futures ETN (NYSEARCA: VXX ) – This ETN is a sympathy and fear play if oil prices were to return to the low $30s. This kind of event would create fear, bringing a bid back to the VIX. This ETN will head higher whenever the VIX and VIX futures head higher. Original Post

U.S. Manufacturing Shows Signs Of Healing: 3 Mutual Fund Picks

By the end of last year, U.S. manufacturing was tottering on the verge of a recession, after the collapse in commodity prices and a stronger dollar took a toll on American factories. However, based on encouraging readings on factory activity in March, it seems that manufacturing is on a resurgence. Philadelphia, New York and Richmond Fed manufacturing reports were impressive for this month. Markit’s flash manufacturing PMI also ticked up in March, while the ISM manufacturing index had already shown signs of a turnaround last month. A rise in new orders for U.S. factory goods in January points toward an easing in manufacturing slump. For now, even though there is volatility in the oil price movement, it has recovered considerably from its mid-February record low. Moreover, the Fed’s dovish stance in its two-day policy meeting last week has weakened the dollar considerably. In this scenario, it will be prudent to invest in mutual funds that focus on the industrial sector. The Industrial Select Sector SPDR ETF (NYSEARCA: XLI ) had gained 4.3% on a year-to-date basis, the second-highest among all the S&P 500 sectors. Factory Activity Positive in March Manufacturing activity in the Philadelphia area turned positive in March for the first time in seven months. The Philadelphia Fed manufacturing index advanced to 12.4 in March from a negative 2.8 in February. Any reading above zero shows that industrial activity is improving. Separately, new orders and shipments rose significantly. Factory activity in the New York region also expanded this month for the first time since last July. The Empire State manufacturing index rose to 0.6 in March from minus 16.6 in February. While new orders and shipments increased, more manufacturers expect business conditions in the region to improve further in the next six months. A measure of manufacturing activity in the lower U.S. Atlantic region too rose in March. The Richmond Manufacturing Index jumped to 22 this month, its highest level in almost six years. The index had been at a negative 4 in February. The index covers manufacturing activity in the District of Columbia, Maryland, Virginia, North Carolina, South Carolina and most of West Virginia. Flash PMI Ticks Up, ISM Turns Around Markit’s flash manufacturing PMI came in at 51.4 in March. The PMI showed that manufacturing activity picked up this month from February’s 28-month low of 51. Output and new business volumes moved up at a slightly faster pace compared to February. This reading followed the Institute for Supply Management’s (ISM) reading on manufacturing activity in February. The ISM manufacturing index increased to 49.5, above January’s reading of 48.2. This indicated that fewer manufacturers had cut back on activities in February than in January. Any reading above 50 shows expansion. Add to this a robust surge in factory orders in January, and it becomes even clearer that the manufacturing sector is coming out of troubled waters. The Commerce Department had reported that new orders for U.S. factory orders rebounded 1.6% in January from a drop of 2.9% in December. New orders increased the most in seven months in January. Factory orders rose broadly in January, with orders for transportation equipment soaring 11.4%. Orders for on-defense capital goods excluding aircraft, which indicates business confidence and spending plans, gained 3.4%. Inventory levels, on the other hand, dropped for the seventh straight month, indicating factories were progressing steadily on reducing inventory glut. Buy The 3 Best-Performing Industrial Mutual Funds It looks like the worst of U.S. manufacturing is coming to an end as recent reports on manufacturing activity in core factory hubs such as Philadelphia, New York and Richmond turn out to be promising. An uptick in Markit’s flash manufacturing PMI in March makes us believe that factory activities in the U.S. will improve. In fact, when it comes to the ISM manufacturing index, RBC Capital Markets’ Chief U.S. economist, Tom Porcelli, expects the index to climb above the 50 mark in April. He believes the negative impact of low oil prices and strong dollar will fade. Moreover, record factory orders data in January also show a release from the slump. Banking on this optimism, investors may bet on three industrial mutual funds that not only boast strong fundamentals, but have also given solid returns over a long period of time. These funds possess a Zacks Mutual Fund Rank #1 (Strong Buy) or #2 (Buy), have positive year-to-date and 5-year annualized returns, minimum initial investments within $5000 and carry a low expense ratio. Fidelity Select Industrials Portfolio No Load (MUTF: FCYIX ) invests the majority of its assets in securities of companies primarily involved in the research, development, manufacture, distribution, supply or sale of industrial products, services or equipment. The fund’s year-to-date and 5-year annualized returns are 2.9% and 10.1%, respectively. It carries a Zacks Mutual Fund Rank #2, and the annual expense ratio of 0.78% is lower than the category average of 1.33%. Fidelity Select Industrial Equipment Portfolio No Load (MUTF: FSCGX ) invests a major portion of its assets in securities of companies principally engaged in the manufacture, distribution or servicing of products and equipment for the industrial sector. The fund’s year-to-date and 5-year annualized returns are 2.9% and 8.3%, respectively. FSCGX carries a Zacks Mutual Fund Rank #1, and its annual expense ratio of 0.77% is lower than the category average of 1.33%. Putnam Global Industrial Fund A (MUTF: PGIAX ) invests a large portion of its assets in securities of companies in the industrial products, services or equipment industries. Even though it invests in large and mid-sized companies worldwide, around 80% of its investments are in the U.S. PGIAX’s year-to-date and 5-year annualized returns are 2.2% and 8.8%, respectively. The fund carries a Zacks Mutual Fund Rank #1, and its annual expense ratio of 1.27% is lower than the category average of 1.33%. Original Post

4 Large-Cap Blend Funds To Buy On Market Rally

After being beaten down heavily at the start of 2016, most of the major benchmarks have lately shown signs of stabilization with strong gains. Factors including a crude rally, improvement in the domestic economy and a low interest rate played the key roles in boosting investor sentiment. While the Dow entered the positive territory for the first time in 2016 last Thursday, the S&P 500 managed the same on Friday. Also, the markets posted weekly gains for the fifth consecutive week. Moreover, the fear-gauge CBOE Volatility Index (VIX) – a widely known measure of volatility – declined 23% since the start of 2016, indicating that the markets are stabilizing. Meanwhile, U.S. based mutual funds that focus on acquiring equity securities also rebounded strongly on the back of impressive performance at the equity markets. While most of the broader U.S. equity fund categories remain in the negative territory year to date, each category registered significant gains over the past one month. Banking on these positive developments, large-cap blend mutual funds, which offer the best of both value and growth investing and promise stable returns, may prove to be ideal investment propositions for now. Factors Leading to the Rebound A strong rally in oil prices was mainly behind the rebound in the major benchmarks. After touching a 13-year low on Feb. 11, the WTI crude gained nearly 50.5% on an increasing possibility of production freeze, continued decline in rig counts and a lower-than-expected rise in crude inventories. Qatari oil minister and president of OPEC, Mohammed Bin Saleh Al-Sada, recently said that the major oil producers will be meeting in Doha on April 17 to discuss production freeze. Meanwhile, rig count in the U.S. declined for the twelfth consecutive week to an all-time low level. Moreover, several economic data that released recently showed that the U.S. economy is on a path of recovery. While the economy witnessed strong and better-than-expected job growth last month, unemployment rate remained in line with the significantly low January rate of 4.9%. Also, the Labor Department reported that the core-Consumer Price Index (CPI), which excludes food and energy prices, gained 2.3% from the year-ago level, witnessing its biggest increase since May 2012. Meanwhile, the Fed recently highlighted that “economic activity has been expanding at a moderate pace despite the global economic and financial developments of recent months.” Separately, in its March meeting, the Federal Open Market Committee (FOMC) decided to keep the rate of interest flat between 0.25% and 0.50% and projected that the number of rate hikes this year will be two instead of four as forecast in its December meeting. The assurance that the rate will be kept unchanged for a longer period of time also had a positive impact on investor sentiment. And to top it all, the Fed Chairwoman Janet Yellen said: “The committee continues to feel that we are on a course where the economy is improving and inflation is moving back up.” 4 Large-Cap Blend Funds to Buy After losing nearly 6% in the first two months of 2016, the large-cap blend category made an impressive rebound on the back of gradual improvement in investor sentiment. This helped the category to register a strong gain of 7% over the past one-month period. The uniqueness of these funds to provide returns at a lower level of risk by investing in both value and growth stocks might have attracted investors. While large-cap funds offer more stability than mid caps or small caps, blend funds offer a great mix of growth and value investment. Given this favorable environment, we highlight four large-cap blend mutual funds that carry either a Zacks Mutual Fund Rank #1 (Strong Buy) or #2 (Buy). We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund. These funds have encouraging one-month and year-to-date returns. The minimum initial investment is within $5000. Also, these funds have a low expense ratio and no sales load. DFA U.S. Large Company I (MUTF: DFUSX ) invests a minimum of 95% of its assets in securities of companies listed in the S&P 500 Index and tries to maintain a similar company weight. DFUSX may also invest in derivatives including futures contracts and options on futures contracts for adjustment of market exposure. Currently, DFUSX carries a Zacks Mutual Fund Rank #1. The fund has one-month and year-to-date returns of 7.2% and 0.9%, respectively. Annual expense ratio of 0.08% is lower than the category average of 1.03%. Vanguard Dividend Appreciation Index Investor (MUTF: VDAIX ) seeks to provide returns similar to the NASDAQ US Dividend Achievers Select Index. VDAIX invests all of its assets in common stocks of companies listed in the index in proportion, which is similar to their weighting in the index. Currently, VDAIX carries a Zacks Mutual Fund Rank #2. The fund has one-month and year-to-date returns of 5.7% and 3.7%, respectively. Annual expense ratio of 0.20% is lower than the category average of 1.03%. State Farm Growth (MUTF: STFGX ) invests heavily in securities including common stocks and others that are expected generate income. The fund invests in securities of companies with a minimum market capitalization of $1.5 billion. STFGX currently carries a Zacks Mutual Fund Rank #2. One-month and year-to-date returns of STFGX are 5.5% and 3.3%, respectively. Annual expense ratio of 0.12% is lower than the category average of 1.03%. Hartford Stock HLS IA (MUTF: HSTAX ) seeks capital appreciation over the long run. HSTAX invests the lion’s share of its assets in equity securities of large-cap companies having market capitalization within the range of the Russell 1000 Index. The fund may invest a maximum of 20% of its assets in foreign securities. Currently, HSTAX carries a Zacks Mutual Fund Rank #2. The fund has one-month and year-to-date returns of 5.4% and 2.6%, respectively. Annual expense ratio of 0.50% is lower than the category average of 1.03%. Original Post