Skip to main content

Safe to buy the Ultra Short Financials again?

Monday I bought the ProShares Ultra Short Financial ETF (SKF). I have bought and sold this ETF several times in the past year or so.

Here are my reasons why I think now is a good time to own SKF:

Financial stocks are emerging from earnings season. The somewhat misplaced enthusiasm over the way many of the financials exceeded drastically lowered expectations is beginning to fade. In terms of year-over-year results, these stocks, pretty much across the board, stunk up the place. We are now seeing some analyst downgrades, even for the likes of Goldman Sachs.

The winds of adversity are blowing in the direction of the financials again. Auction Rate Securities are negatively impacting a range of financial institutions. They are engaged in buying back illiquid securities and are facing potential fines as the New York Attorney General generally makes life miserable for them. It appears that bonds backed by consumer loans and credit card debt are becoming increasingly shaky. Credit requirements are tightening according to surveys of loan officers so lending is slowing. Merger and buyout activity has slowed drastically, curbing yet another potential earnings stream.

Housing has not improved. Indeed, we have probably seen the peak for 2008. It is already August and as fall approaches, the residential real estate market will go into hibernation until spring of 2009. This won't help the mortgages or mortgage-backed securities still on the balance sheets of many financials.

The SEC ban on naked shorting of financial stocks is set to expire on Wednesday.

We have seen the short energy/buy financials trade evolve into short energy/buy tech. Tech stocks are getting all the attention and financials are getting all the bad press.

SKF had fallen to support at about the $110 range (see the horizontal line on the chart below) and was trading at its 200-day moving average. On Monday the ETF dropped nearly to $106 but recovered and closed over $110. With the fundamental picture for financials deteriorating once again, it appears safe to buy SKF again. As I have written in prior posts, though, it doesn't pay to chase the ultra ETFs. Having fallen from its July peak of over $200 down to $110, Monday looked like it was presenting a pretty good entry point so I picked up the ETF at $111 and change.

Chart of SKF, 8-12-2008
Closing today at $119.75, SKF has at least started out on the right foot. If the financials wilt as I expect, it may not be too late to jump on this trade.

Disclosure: long SKF

Comments

Popular posts from this blog

Running TradeRadar on Windows 7 and Windows 8

Development of the original TradeRadar Stock Inspector software was begun back in the days before Windows 7 and Windows 8 were available.

As these newer versions of Windows have become more popular, we have heard from some users that they are having problems installing and running TradeRadar on their newer PCs.

The good news is that TradeRadar will work just fine on Windows 7 and Windows 8. All you have to do is adjust the Windows Compatibility Settings to ensure TradeRadar runs as intended.

It is recommended that you can apply Compatibility Settings when running the initial installation; however, it is also possible to apply Compatibility Settings after the program has been installed.

Prior to installation
After downloading the install program, go to the folder where you have stored the TradeRadarStkInsp_7_Setup.exe or TradeRadarStkInsp_7_PRO_Setup.exe executable. Right-click on the executable file and select Properties. Click the Compatibility tab. Adjust the Compatibility mode to …

Durable Goods report for Sept just so-so but Computer segment is on fire

The Durable Goods advanced report for September 2011 was released on Wednesday.

I like to dig into the Durable Goods report because it can be useful for seeing how tech in aggregate is performing and how the sector may perform in the future. I always focus on two particular measures: shipments and new orders. Let's see how it played out last month.

Shipments -- 

I generally give less importance to Shipments since this is a backward looking measure reflecting orders that have been confirmed, manufactured and shipped. It's similar to earnings reports -- it's good to know but the data is in the past and we're more interested in the future. The following chart shows how September shipments looked for the overall tech sector:


Results for the overall tech sector were a bit weak but take a look at the next chart which tracks the Computers and related products segment:


Results here were actually quite good and, to make things even better, the previous month was revised upward.

N…

Alert HQ has moved!

End of an era!

This site was started way back in 2006/2007 to showcase my blog posts and the Alert HQ buy signals and sell signals. Alert HQ grew to include other kinds of stock alerts including Swing Signals, Trend Busters, Trend Leaders, Cash Flow Kings and more.

In the meantime, I built a sister site, TradingStockAlerts.com and I started using some of the same Alert HQ content over there. As a result, I am discontinuing the Alert HQ data here at Trade-Radar.com

The good news, however, is that all the Alert HQ signals and stock screens are still completely free. In addition, the pages have been enhanced so that you can hover over a stock symbol and a small chart will pop up so you can get a quick look at the stock's recent price action. If you click on a symbol it will take you to a page with plenty of financial and technical analysis information (still free!) as well as a larger chart that you can play with in terms of adding or deleting indicators, moving averages, etc.

Click …