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Weekly ProShares review shows bulls in the ascendancy -- can it last?

Last week I presented a list of the ProShares ETFs that had exhibited the strongest performance over the course of the last week. I received a number of comments over at Seeking Alpha requesting that I do it again so here it is.

Purpose --

The ProShares leveraged ETFs are primarily short-term trading vehicles and, as such, they can be viewed as indicators of short-term sentiment. Since the ETFs come in both styles and sectors, this analysis might shed some light on how investors currently view large caps, small caps, sectors and indexes.

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). The criteria is that any ETF with double-digit gains makes the list.

This week I also add a measure of volume where I compare this week's average volume to the previous week's average volume. Increased volume may confirm increase in price as an indicator of a move with staying power.

Symbol Fund Name Group Objective Percent Change - Price Percent Change - Avg Volume
URE Ultra Real Estate Ultra 200% of the underlying 18.3% 2.4%
UYM Ultra Basic Materials Ultra 200% of the underlying 15.1% 1.4%
UVT Ultra Russell2000 Value Ultra 200% of the underlying 13.1% -40.5%
EFO Ultra MSCI EAFE Ultra 200% of the underlying 12.7% 176.8%
UVU Ultra Russell MidCap Value Ultra 200% of the underlying 12.1% -78.2%
UPRO UltraPro S&P500 Ultra 300% of the underlying 11.6% 8.4%
MVV Ultra MidCap400 Ultra 200% of the underlying 11.5% -25.2%
EET Ultra MSCI Emerging Markets Ultra 200% of the underlying 11.5% 16.1%
UWM Ultra Russell2000 Ultra 200% of the underlying 11.1% -14.9%
DIG Ultra Oil & Gas Ultra 200% of the underlying 10.9% -27.2%
XPP Ultra FTSE/Xinhua China 25 Ultra 200% of the underlying 10.9% 22.4%
UKK Ultra Russell2000 Growth Ultra 200% of the underlying 10.6% -34.4%
SAA Ultra SmallCap600 Ultra 200% of the underlying 10.5% 33.8%
LTL Ultra Telecommunications Ultra 200% of the underlying 10.4% -31.6%
UCO Ultra DJ-UBS Crude Oil Ultra 200% of the underlying 10.2% -17.7%
UXI Ultra Industrials Ultra 200% of the underlying 10.1% 8.2%

As I said above, this list is a reflection of short-term sentiment. One thing is clear - this past week has seen sentiment shift to the bullish side. Last week's post had a bevy of double short ETFs in the top spots and this week's list has all double long ETFs.

At the top of the list is the Ultra Real Estate ETF (URE) with a whopping 18.3% gain. I have read that there are a number of funds that were put together to buy troubled commercial real estate at value prices that are now actually returning investors' money because the bargains just weren't there. One interpretation is that CRE just isn't in as much trouble as some observers seem to think. That would support the "buy URE on dips" strategy which seems to have played out this week.

We can see the bounce in Basic Materials, one of the most beaten down sectors in this correction. It's not unusual to see the most out of favor sector suddenly gain the most.

One odd thing is that all the double long ETFs that are related to the Russell 2000 showed good gains but on diminished volume. This could show a lack of conviction.

Foreign stocks recovering?

On the other hand, based on volume, investors seem pretty convinced that it's a good idea to be bullish on the MSCI EAFE index. The Ultra MSCI EAFE (EFO) gained over 12% and average volume increased by 176%. Given that this ETF tracks the equity market performance of Europe, Australasia and the Far East (excluding the US & Canada) we have another situation where investors seem to be saying that these markets are way over-sold and due for a bounce.

With some China indexes in bear market territory (down 20%) it is interesting to see the Ultra FTSE/Xinhua China 25 (XPP) up over 10% with volume increasing over 22%. With reports of Chinese manufacturing exports exceeding expectations, investors may be making their way back to China and XPP could be the early indicator.

Selling their shorts?

Not shown in the chart above are several notable situations where volume was high as prices fell. For example, investors unloaded UltraShort Russell MidCap Growth (SDK) with price falling almost 19% and volume up 453%. Similarly, the UltraShort Russell2000 Value (SJH) dived over 10% on volume that increased by 231%.

It seems investors have quite a bit of conviction that it is unwise to hold these double short ETFs any longer.

Summary --

There's no doubt that investors short-term sentiment has been bullish over the course of the last week. The question is whether the short-term optimism can extend for more than a few days. Based on this week's results, the odds are in favor of the bulls but not overwhelmingly so.  I sure wish the volume numbers had been a little stronger for those double long ETFs.

On the other hand, it's a welcome sign to see the double long ETFs on the upswing, no matter what the volume numbers are. A low volume rally is still a rally and climbing a wall of worry still results in gains even if those gains aren't explosive.

Stop by again next week and we'll review the latest action in the ProSharesETFs.


Disclosure: no positions in any ETFs listed in this article though author does hold other double long ProShares ETFs

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