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Monday, June 7, 2010

Ride the momentum train -- this week's strongest ProShares ETFs

It's no secret this market has increased in volatility lately. In this post we look for signs of sector momentum in the short term moves of the ProShares leveraged ETFs. These favorites of traders, individual investors and institutions alike have been used as hedges, contrarian indicators, momentum plays and vehicles to juice up portfolios.

The following table lists those members of the ProShares family that have turned in the best performance over the course of the last week (the period from last Tuesday through this Monday):

Symbol Fund Name Group Objective Percent Change
JPX UltraShort MSCI Pacific ex-Japan Short 200% of the Inverse 7.9%
SJH UltraShort Russell2000 Value Short 200% of the Inverse 7.7%
SMN UltraShort Basic Materials Short 200% of the Inverse 7.7%
SRS UltraShort Real Estate Short 200% of the Inverse 7.6%
SIJ UltraShort Industrials Short 200% of the Inverse 7.0%
SSG UltraShort Semiconductors Short 200% of the Inverse 6.7%
EWV UltraShort MSCI Japan Short 200% of the Inverse 6.4%
SKF UltraShort Financials Short 200% of the Inverse 6.4%
TWM UltraShort Russell2000 Short 200% of the Inverse 6.2%
EFU UltraShort MSCI EAFE Short 200% of the Inverse 6.0%

Noticeable in their absence are the Ultra Gold (UGL) and Ultra Silver (AGQ) ETFs. Precious metals had been on a roll as investors looked for a safe haven. That trend seems to be on the wane.

With a couple of double short ETFs focused on the Russell 2000 making this list, it appears that investors are abandoning small caps.

Foreign stocks are also pretty out of favor. On this list are double short ETFs that track MSCI Pacific ex-Japan, Japan itself and the MSCI EAFE. Furthermore, Basic Materials are being shunned. This is a sign that investors have their doubts about robustness of the global economy in general. And keep in mind that basic materials are important for emerging market countries that are often big exporters of raw materials. So this is a case of the market voting against developed countries and developing countries alike.

Conclusion --

Given that the list above is comprised entirely of double short ETFs, it shows which sectors have been most out of favor and suggests how a fairly active trader might look to catch some gains while accepting the downward momentum of small stocks, foreign stocks, basic materials and other sectors represented above.

On the other hand, if you look at ProShares activity as a contrary indicator, then perhaps you should look at some of the double long ETFs in these sectors.

In any case, if you would like to see a list like this every week, let me know by leaving a comment or sending me an email.

In the meantime, perhaps you should consider embracing the volatility and riding the momentum with one of these ProShares ETFs.

Disclosure: no positions in any ETFs listed in this article (unfortunately)

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