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Wednesday, January 23, 2008

UYG - Time to nibble on a financial ETF

It was a gut feeling as much as anything, but it seemed to me that financial stocks were ready for a bit of a resurgence. Watching the UltraShort Financial ETF (SKF) jump and then proceed to plunge on Tuesday was the first tipoff. Seeing that behavior begin to repeat Wednesday morning convinced me that perhaps financials were ready to make a real move up.

Since I had no idea whether this would be a sustained move or not, I elected to open just a small position in the ProShares Ultra Financial ETF (UYG) in mid-morning. It was then a pleasant surprise to see the hard-charging financials lead the market upward in the late afternoon on news that New York State's insurance regulator was encouraging banks to support bond insurers. Combined with Tuesday's surprise rate cut and another rate cut expected when the Fed meets next week, it does seem like a few factors are now falling in line to support the financials after their long decent from their peak last summer.

Having gotten in at $34.11 and watching UYG close at $36.94 today, I am enjoying seeing the ETF up over 8% already. It remains to be seen, however, whether this move can last.

4 comments:

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Anonymous said...

If you bought at $37 (see comment above), then I hope that you do not also own a home in Florida or California. I am buying a little at $7+, but waiting for $5+ to really get back in.

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