Tag: inverse etfs

The Market Is Looking Expensive

Posted on by Matt Thalman

If you are a trader, you don’t care how the market stacks up to past fundamentals.

But, if you are a long-term investor, knowing how the market appears today from a fundamental standpoint, compared to other times, is something you want to keep an eye on.

Knowing when the market is becoming expensive or even overpriced is essential because that tells you it may be time to start taking your foot off the gas. Or the other side of that coin is that the market appears cheap or underpriced.

These times are when the words of Warren Buffett, “Be greedy when others are fearful and fearful when others are greedy,” stand out the most to me.

Buffett is trying to tell investors that when others are buying, despite stocks and the market as a whole being very expensive, you should be concerned. He also says that you should be greedy when others are afraid, likely because of market turmoil and stocks are selling off. Buffett gives you a straightforward, back-of-the-napkin blueprint of when to sell and buy.

With that all said, I don’t believe there are hard-pressed rules on this is when to sell, or this is when to buy.

However, I think now is a time that you should start considering when you will sell or, at the very least, start planning your next moves based on how the market reacts to the coming weeks or months.

One reason I believe we may be hitting a peak is because of general market sentiment. Towards the end of the summer, most market participants, the talking heads on news outlets, and even Wall Street (i.e., the big banks) were saying a recession was very likely in 2023.

However, the market was rallying during that time, then we peaked in August and finally sold off in September. During the fall, the markets were mostly flat, and then things spiked in January. Now the thinking is we may not hit a recession, and inflation may be behind us. Is the market feeling like it could be getting greedy?

But what about the complex data showing us the markets may be overvalued right now? Continue reading "The Market Is Looking Expensive" →

Now is the Time to Hedge Your Portfolio

Posted on by Matt Thalman

A few weeks ago, I asked if you believed the current rally was here to stay. At that time, the market had been rallying since the middle of June. Some market participants were calling the June low 'the bottom.'

Time will tell if June was the bottom, but based on what has happened over the last two weeks of August, I am betting that we have not yet seen the bottom.

Let's review quickly what just occurred. The Federal Reserve's President, Jerome Powell, told the country that there would be "some pain" in the coming months. Powell also said that the Fed would "keep at it until the job is done," referring to getting inflation under control.

Powell didn't detail how severe the pain would be or how businesses and households would feel it. Still, I think it is safe to say that Powell acknowledges we are likely heading towards a recession.

The market's reaction to Powell's comments sent the S&P 500 down 9.2% since the August 16 high of 4,327. The NASDAQ is down 11%, while the Dow Jones Industrial Average is off by 8.2% since August 16.

Not only is the NASDAQ down double digits, but the exchange-traded funds that track the major indexes, The SPDR S&P 500 ETF (SPY) and the Invesco NASDAQ QQQ ETF (QQQ), are both now trading below their 50-day averages. That is in addition to them already having given up their 200-day, 100-day, and 20-day moving averages.

Furthermore, economist after economists, jumped on the 'recession is imminent', bandwagon this past week. Most of these economists have even pointed out that the Federal Reserve has miscalculated the intense inflation we are experiencing.

They were referring to when the Fed told us back in the spring that the inflation we were experiencing at that time was "transitory." The Fed was wrong about that, and it is unlikely that the Fed members want to be wrong again by underestimating the persistence of current inflationary causes.

Due to their previous missteps, many believe the Fed will not take its foot off the gas quickly enough. This makes it unlikely the economy will experience a soft landing which we have been hearing about over the past few months.

And if you don't know the opposite of a 'soft landing' in economics, it's a recession. Continue reading "Now is the Time to Hedge Your Portfolio" →

ETFs For A Negative Market Turn

Posted on by Matt Thalman

Do you believe the current market rally is here to stay?

That belief would mean that despite two consecutive quarters of negative Gross Domestic Profit numbers and the Federal Reserve continuing to increase interest rates as a method to bring down inflation, which is at a level that we have not seen since the 1980s, we actually are not currently staring down the barrel of a recession.

There are economists and market participants currently on both sides of the argument of whether or not we are heading towards a recession.

I am not personally confident enough to invest based on where I think we are heading in the short term. But I still like to know what is available for me to buy if the tide seems to be turning one way or the other.

As I mentioned, I would like to give you a few ETFs that would make you money if the market turns negative. These ETFs are all inverse or leveraged funds, meaning they will experience contango if held for longer than one day. Lastly, I would also like to point out that these ETFs, if used correctly, could help investors hedge their portfolio’s against a market correction.

The first few I would like to mention are the basic inverse ETFs that track major indexes. The Direxion Daily S&P 500 Bear 1X Shares ETF (SPDN) tracks the S&P 500 and will increase in value daily if the S&P 500 goes lower.

For example, if the S&P 500 falls 1%, SPDN will increase by 1%. However, if the S&P 500 increases by 1%, SPDN will decrease by 1%. SPDN and every other ETF I mention today will only produce a near-exact correlation to its corresponding index on a one-day basis. Continue reading "ETFs For A Negative Market Turn" →

Triangles or Crystal Ball?

Posted on by The INO.com Team

It would almost seem like MarketClub's Trade Triangles could see into the future, but you won't find any mumbo-jumbo or "black box" technique hiding behind our symbols, just market-conquering technical analysis.

If you tuned into last week's MarketClub TV show, you heard Adam talking about the Proshares Ultra-Short inverse etf, SKF.

MarketClub gave SKF gave a green monthly Trade Triangle on May 24th - nearly 3 months ago(!) with an exit on June 29th (profit of 1.06%). Then, a re-entry point occurred on July 18th and if you bought then, you'd be up 32.71%!

Even if you didn't get in until the morning after Adam talked about it on MarketClub TV, you STILL be up 28.33%!

I don't think we could make it any easier if we tried.

Every success in this crazy market,

Susan Jackson
MarketClub TV Co-Host