Tag Archives: european

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

5 Market-Beating International ETFs YTD

The worries that cropped up last year intensified with the start of this year, leading to brutal trading in stocks across the globe. This is especially true as the Vanguard FTSE All-World ex-US ETF (NYSEARCA: VEU ) targeting the international equity market has lost about 5.8% from a year-to-date look compared to a loss of 5.5% for iShares MSCI ACWI Index ETF (NASDAQ: ACWI ), which targets the global stock market including the U.S. In particular, the collapse in oil price to below the 12-year lows and persistent weakness in China are the major culprits of the woeful performance. Emerging markets have been struggling while developed markets are also exhibiting slow growth amid streaks of volatility and uncertainty. The U.S. economy has also started to feel the pain of an ongoing financial instability and global growth concerns given that GDP growth came to a standstill in 2015. Notably, the global stocks had wiped out nearly $7.8 trillion in value in the first three weeks of 2016. However, the stocks rebounded at the end of the fourth week following additional stimulus hopes from the European Central Bank (ECB) to print more money and cut interest rates further. Additionally, the Bank of Japan (BoJ) propelled the stocks higher by pushing its interest rates to a negative territory. Further, oil has also gained momentum reversing some of the losses incurred in the year (read: Japan ETFs to Buy on Negative Interest Rates ). While this is true, the positive sentiments proved to be short-lived and the global stocks again started another week on a sour note. In such a weak backdrop, most of the international markets and their ETFs have been able to fight through the bearish trend and have delivered handsome returns so far this year crushing the SPDR S&P 500 Trust ETF (NYSEARCA: SPY ) . Below we have highlighted some of them: iShares MSCI Indonesia Investable Market Index Fund (NYSEARCA: EIDO ) This is the most popular ETF tracking the Indonesian market with AUM of $252.4 million and average daily volume of more than 722,000 shares. The fund tracks the MSCI Indonesia Investable Market Index, holding 87 securities in its basket while charging 64 bps in annual fees from investors. The product is somewhat concentrated on both sectors and securities. The top two firms account for at least 11% of total assets each while from a sector look financials dominates the fund’s return with more than one-third share. Consumer discretionary, telecommunication services and consumer staples round off the next three spots with a double-digit exposure each. EIDO has added 3.6% so far this year and has a Zacks ETF Rank of 3 or ‘Hold’ rating with a High risk outlook (read: Believe in T Rowe Price? Invest in These EM ETFs ). iShares MSCI Thailand Capped ETF (NYSEARCA: THD ) The fund targets the Thailand equity market and tracks the MSCI Thailand IMI 25/50 Index. It has amassed nearly $218.2 million in its asset base and trades in good volume of 186,000 shares a day on average, probably ensuring no additional cost beyond the expense ratio of 0.64%. In total, the ETF holds 126 stocks, with each accounting for less than 7% share. It is somewhat concentrated from a sector perspective as financials comprises more than one-fourth of total assets while energy and industrials round off the next two spots with double-digit exposure each. The product is up 3.4% in the year-to-date timeframe and has a Zacks ETF Rank of 3 with a Medium risk outlook. iShares MSCI Malaysia ETF (NYSEARCA: EWM ) This ETF follows the MSCI Malaysia Index and has a targeted exposure to the Malaysian stock market. Holding 43 stocks in its basket, the fund is highly concentrated on the top three firms with at least 9% share each while the other firms hold no more than 5.7% of assets. Financials dominates the fund’s return at 30.3%, followed by industrials and utilities that make up for 14.8% share each. The fund has been able to manage assets worth $217.3 million and charges 47 bps in fees per year from investors. It is heavily traded with average daily volumes of 2.21 million shares. EWM has gained 3.4% this year so far and has a Zacks ETF Rank of 3 with a Medium risk outlook. iShares MSCI Chile Capped ETF (NYSEARCA: ECH ) This product provides exposure to 31 Chilean stocks by tracking the MSCI Chile IMI 25/50 Index. Here again, the top three firms dominate the portfolio with at least 8% share each while other firms account for less than 6.8% of assets. Further, about one-third of the portfolio is allotted toward utilities while financials and materials also receive double-digit exposure each. The ETF has accumulated $177.3 million in AUM and sees solid volume of more than 290,000 shares a day on average. Expense ratio came in at 0.64%. The fund is up 2.8% in the same period and has a Zacks ETF Rank of 3 with a Medium risk outlook. Deutsche X-trackers MSCI Mexico Hedged Equity ETF (NYSEARCA: DBMX ) This product offers exposure to the Mexican equity markets while at the same time hedges against any fall in the peso against the U.S. dollar by tracking the MSCI Mexico IMI 25/50 US Dollar Hedged Index. The fund holds 62 securities with the largest allocation to the top two firms that collectively make up for 22.9% of assets. From a sector look, consumer staples accounts for the largest share at 30.4% closely followed by financials (20.9%), telecom (14%) and industrials (13.2%). The fund has amassed $4.1 million in its asset base while trades in light volume of about 2,000 shares. It charges 50 bps in fees per year and has added 2.3% so far this year. DBMX has a Zacks Rank of 2 or ‘Buy’ rating with a Medium risk outlook. Link to the original post on Zacks.com