Tag Archives: etfs

5 Wild Inverse ETFs Betting Against The Market

Inverse ETFs are all the rage so far in 2016. As the market retests the lows made in January, these instruments are making new yearly highs. Those that got in before the start of the year are seeing double-digit returns, with the market down over 10%. Inverse ETFs must be looked at as tools of protection, not investments. The leveraged ETFs are especially dangerous as they can go down just as fast as they go up. A common mistake that is made is when an investor is nervous and starts to panic. They enter an inverse ETF when the market is very weak, thinking they’ve done well after seeing one day with a nice percentage move. However, this is only to be followed by a week of pain because the market had a relief rally. This mistake is called chasing and is a strategy for future broke investors and traders. A better strategy when using ETFs is one that most people aren’t familiar or comfortable with. Rather, it’s one of a trader. If we are in a bear market, there will be furious rallies as there always is. News will hit and bottom pickers will get in at the same time that shorts will be covering, causing a bear market rally. When this process plays out inverse ETFs will provide a nice entry point to protect against your overall portfolio from further selling. When the relief rally is over and market comes back in, it is smart to take profits and wait for the next opportunity. There are many inverse ETFs to choose from, but it is important to pick the right ones for our strategy in order to get the most return. One of my strategies over the years has been to use filters to sort out which instruments are reacting on a daily basis. I look for high percentage and large up and down point moves. This is a game for those that like volatility and risk-adverse investors should shy away. Some of the inverse ETFs that have been popping up on my filters of late are listed below. These instruments should be very active going forward and should be utilized only by the most nimble investors. ProShares UltraShort Bloomberg Crude Oil (NYSEARCA: SCO ) will move two times the inverse to crude oil. If oil is down 5%, this instrument will be up 10%. This move would protect investors that were allocated heavy in oil stocks. In the chart below, we see Exxon Mobil (NYSE: XOM ) versus SCO over the last year, and how investors could protect against a position in Exxon. SCO was up 2% today with crude oil down over 1%. Direxion Daily FTSE China Bear 3X ETF (NYSEARCA: YANG ) is all about China. This ETF will move three times the inverse of the FTSE China 50 Index. The fund creates short exposure by using 80% of its assets to get short in futures and other Chinese instruments. China has been a real drag on global stock markets as issues of global growth are surfacing because the Chinese economy seems to be slowing. The chart below shows China internet giant Baidu (NASDAQ: BIDU ) over the last three months in comparison to YANG. The ETF was up 7% today in anticipation of a big down day in china on Monday, when traders return from the New Year holiday. Direxion Daily Gold Miners Bull 3X ETF (NYSEARCA: NUGT ) seeks to reflect three times the inverse of the performance of gold minor stocks in the NYSE Arca Gold Miners Index. Gold is shooting higher because of financial stress fears coming from the banks; this in turn is good for gold stocks. The minors essentially get paid more for every ounce of gold they mine, improving the bottom line. If fears about European banks persist; gold will continue to have a bid. With all the gold miners catching that bid today, NUGT was up 22% as of this writing. Direxion Daily Financial Bear 3X ETF (NYSEARCA: FAZ ) is an inverse financial ETF that will move three times the inverse of the performance of the Russell 1000 Financial Services Index. The combination of European banking woes and the potential of negative interest rates has lead to weakness in the sector. The chart below shows Goldman Sachs (NYSE: GS ) in comparison to FAZ over the last three months. FAZ was up 8% today as of this writing. Direxion Daily Emrg Mkts Bear 3X ETF (NYSEARCA: EDZ ) is an inverse emerging markets ETF that moves three times the inverse of the performance of the MSCI Emerging Markets Index. This fund will move higher as emerging stock markets struggle. These markets have been some of the hardest hit over the last year, and that is reflected in the surge of EDZ. The ETF was up 5% today as of this writing. In Summary Leveraged Inverse ETFs give investors options in protecting their core positions. Markets will become volatile when under selling pressure, and these ETFs will follow suit. The approach for this protection isn’t one of chasing, like one would chase a momentum stock, but rather buying large market rallies and selling the panic of market dips. Original Post

What Do Twitter And Zynga Earnings Mean For Social Media ETF?

The Global X Social Media Index ETF (NASDAQ: SOCL ) is going through a rough patch. The ongoing tech rout, mainly instigated by overvaluation concerns amid broad-based gloom and a weak guidance issued by LinkedIn Corporation (NYSE: LNKD ) , was already there to punish the fund (read: LinkedIn Crashes: Should You Connect with Social Media ETF? ). Then, fresh woes emanated from the fourth-quarter earnings results from social networking site Twitter (NYSE: TWTR ) and social game developer Zynga (NASDAQ: ZNGA ) will likely compel investors to stay away from the social media ETF in the near term. Twitter’s Q4 in Detail The company’s fourth-quarter 2015 loss per share (excluding the stock-based compensation expense) of $0.07 was narrower than the Zacks Consensus Estimate of $0.13 loss per share. Including the stock-based compensation expense, the company posted a loss of $0.13 per share on a GAAP basis. This was narrower than the year-ago loss of $0.20 per share. The company’s non-GAAP earnings (excluding the stock-based compensation expense) were $0.16 per share, up 33.3% year over year. Revenues of $710.5 million in the quarter missed the Zacks Consensus Estimate of $718 million. Revenues were up 48.3% from the year-ago period. Absent the impact of negative currency translation, revenues grew 53%. The company finished the quarter with an average 320 million monthly active users (MAU). This indicated no change quarter over quarter and 9% year-over-year expansion. Although this is the first quarter that Twitter has seen no user growth sequentially, investors clearly could not digest the fact. The blow came in the form of guidance as well. Twitter anticipates total revenue between $595 million and $610 million for the first quarter of 2016, way below the Zacks Consensus Estimate which was pegged at $630 million prior to the release. Market Impact The soft MAU metric, an earnings miss and soft revenue guidance dampened investors’ mood as the stock tumbled 3% after hours. Year to date, the stock is down 35.3%. In the last one year, the stock has plunged about 70%. Twitter has a Zacks Rank #3 (Hold), which is subject to change post earnings release. The stock is a good growth and momentum play with a Zacks Style Score of ‘A’, but it lacks the value quotient as indicated by the score of ‘F’. There is a high chance that Twitter will decline in the coming trading sessions, especially given the ongoing correction in the online and social media space. Zynga’s Q4 in Detail GAAP loss per share (excluding the stock-based compensation expense) of $0.02 cents was narrower than the Zacks Consensus Estimate of $0.04 cents loss per share. Including the charges, GAAP loss was $0.5 per share, same as the year-ago quarter. Zynga’s revenues of $185.8 million beat the Zacks Consensus Estimate of $177 million. Zynga also failed to live up of analysts’ projection as it expects first-quarter 2016 revenues in the range of $160-$175 million, below the Zacks Consensus Estimate of $177 million. Market Impact Zynga also saw a landslide in its shares after hours with a 10.8% plunge. Year to date, the stock is down 20.5%. Though the stock currently has a Zacks Rank #3, it looks like that the rank is due for a downgrade. The stock is a decent momentum play with a Zacks Style Score of ‘A’, but its value and growth scores are not optimistic. Social Media ETF in Focus Notably, Twitter does not have a sizable exposure in the overall ETF world, with SOCL holding just 2.7% share in it. However, the company’s results are crucial to the entire social media sector. Plus, a freefall in the shares of Zynga – which accounts for about 3% of SOCL – will make matters worse. However, SOCL has strong long-term fundamentals and carries a Zacks ETF Rank #2 (Buy). So, investors having a strong gut for risks can play this dip. SOCL is down 19.3% so far this year (see all technology ETFs here). Link to the original post on Zacks.com

Lipper U.S. Fund Flows-February 3, 2016

By Tom Roseen Did we just see mutual fund investors turn on a dime? After yanking nearly $5 billion from their accounts the previous week, this past week’s data show estimated net flows of $2.1 billion into equity mutual funds-for their first positive flows week this year. Although the benchmark Dow Jones Industrial Average was up for the week, the scant 392 points probably wasn’t as important as a rising sentiment that 16,000 is as good a floor as any we’ll find in this market. But count equity exchange-traded funds’ (ETFs’) authorized participants among the unconvinced: they withdrew about $8.5 billion (net), backing out of the SPDR S&P 500 Trust ETF ( SPY , -$3.2 billion ) and the iShares Russell 2000 ETF ( IWM , -$1.2 billion ) , but they made modest contributions to the SPDR Gold Trust ETF ( GLD , +$758 million ) . Taxable bond mutual funds suffered their thirteenth weekly net outflows (-$523 million), but the week’s magnitude was the lightest yet. The Loan Participation Funds classification (-$333 million) notched its twenty-eighth consecutive week of outflows from mutual fund investors and High Yield Funds suffered outflows of $108 million as investors kept a wary eye on the junk sector. On the other hand, bond ETFs collected $671 million of inflows as the week’s biggest individual bond ETF inflows belonged to the iShares 7-10 Treasury Bond ETF ( IEF , +$412 million ) , while the iShares iBoxx $ Investment Grade Corporate Bond ETF ( LQD , -$423 million ) led the outflows list. Municipal bond mutual fund investors added $585 million to their accounts while the muni market gained 0.48% for the week-after the previous week’s little tumble. Money market funds saw outflows of $3.8 billion this past week, of which institutional investors pulled $4.2 billion and retail investors redeemed $400 million.